149 Madison Ave. Corp. v. Asselta
In 149 Madison Ave. Corp. v. Asselta, 331 U.S. 199, 204, 67 S.Ct. 1178, 1181, 91 L.Ed. 1432, modified on other grounds, 331 U.S. 795, 67 S.Ct. 1726, 91 L.Ed. 1822 (1947), the employer and employees used essentially the same formula as in the present case to determine the hourly and overtime rates:
"The hourly rates for those regularly employed more than forty (40) hours per week shall be determined by dividing their weekly earnings by the number of hours employed plus one-half the number of hours actually employed in excess of forty (40) hours." Id.
While this may have been an acceptable arrangement had the parties adhered to it, the Supreme Court held that the practice of the parties in Asselta was inconsistent with the agreement. Id.
In Asselta, employee absences were attributed either to an excusable or inexcusable cause. Id. at 203, 67 S.Ct. at 1181.
If it was an excusable cause, the employee was paid at the formula rate with the provision that six of the hours worked were compensated at the overtime rate, regardless of whether the total hours worked during that week were more or less than forty. Id.
If the employee's absence was inexcusable, he or she was apparently paid according to the formula rate. Id.
The Board Agreement further provided that all regular employees except watchmen who worked in excess of forty-six hours were to be paid at one and three-quarters the formula rate. Id.
In other words, regular employees who worked in excess of forty-six hours received one overtime rate for hours worked between forty and forty-six, and a higher rate for all hours worked in excess of forty-six. Watchmen had a similar dual overtime rate. Id.
For all hours worked over fifty-four, watchmen were paid twice the formula rate. Id.
Rather than receiving the formula rate, part-time workers' hourly wages were calculated by dividing the weekly wage for full-time workers by the regular workweek. Id. at 205, 67 S.Ct. at 1181-82.
Therefore, part-time employees were paid a pro rata share of the regular workweek rather than according to the formula rate. Id.
The Supreme Court agreed with the employees that the formula rate was not the regular rate. Rather, the regular rate was substantially obtained by dividing the weekly wage by the hours scheduled during that week. This view was bolstered by the fact that part-time workers received a pro rata share of the weekly wage rather than a straightforward calculation of hours worked multiplied by the formula hourly rate.
Additionally, the Court pointed to the fact that the hourly rate was not consistently applied. For example, an employee whose absence was excusable could receive overtime compensation when that employee worked less than forty hours in that week.
The Supreme Court stated that: "The payment of 'overtime' compensation for non-overtime work raises strong doubt as to the integrity of the hourly rate upon the basis of which the 'overtime' compensation is calculated." Id. at 205, 67 S.Ct. at 1182.
Also, there was evidence in the Board Agreement that the wages were calculated in such a way as to effectively tie time-and-a-half pay to a forty-six hour workweek, rather than, as required by the FLSA, a forty-hour workweek. "Overtime over forty-six (46) hours is paid at a rate of time and three-quarters in an effort approximately to equal the overtime to which an employee would ordinarily be entitled, if it were computed on the basis of time and a half after a forty-six (46) hour week." Id. at 207, 67 S.Ct. at 1183.
The Court also noted that the payments made to employees that were meant to represent the retroactive application of the Board Agreement to the period the agreement was being negotiated were "in no sense determined by application of hourly rates derived from the formula." Id. at 209, 67 S.Ct. at 1183-84.