Urnikis-Negro v. American Family Property Services
616 F.3d 665 | Court of Appeals for the Seventh Circuit | 2010
What This Case Means for Subcontractors
A company misclassified an employee as exempt from overtime pay and paid her a fixed salary regardless of hours worked. The court ruled the company violated the Fair Labor Standards Act and upheld the use of the fluctuating workweek method to calculate overtime damages. This method divides the weekly salary by total hours worked (not just 40) to determine the regular rate, then applies the 1.5x multiplier to overtime hours. The decision matters because it shows courts will enforce overtime pay even when there's a fixed salary arrangement, and the calculation method can significantly reduce what employers owe.
Key Takeaways
- •Misclassifying workers as exempt from overtime is costly—the court enforced full back pay plus damages using a method that reduced the hourly rate but still required overtime premiums
- •A fixed salary covering all hours worked does not exempt you from overtime obligations; if the employee works over 40 hours weekly, overtime pay is required
- •The fluctuating workweek method can be used against you in litigation, so document your actual hours and pay practices carefully to avoid disputes
It was appropriate for the district court to apply the FWW method in this case.
Frequently Asked Question
If I pay a subcontractor or employee a fixed weekly salary, do I still owe overtime?
Yes. A fixed salary does not exempt anyone from overtime pay under the Fair Labor Standards Act. If the worker regularly works more than 40 hours per week, you must pay overtime at 1.5 times their regular rate for those extra hours. The court will calculate what you owe based on actual hours worked, not your salary arrangement.
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