Newman v. Advanced Technology Innovation Corp.
22 Wage & Hour Cas.2d (BNA) 803
1st Cir.2014Background
- Newman and Patague were recruited by Advanced Technology to work on remote engineering assignments supervised by General Dynamics but paid by Advanced Technology.
- Each signed contracts listing an hourly wage, an overtime rate (>1.5× hourly), and a weekly per diem (capped at $141/day) described as reimbursement for expenses "for each day actually worked."
- Plaintiffs alleged the per diem effectively functioned as a wage supplement tied to hours worked and thus should be included in the FLSA "regular rate" for overtime calculation.
- Advanced Technology used a formula to prorate weekly per diem when employees worked fewer than 40 hours: ((hours ÷ 40) × total available days) × $141, with an intermediate rounding step.
- District court granted summary judgment for employer, finding per diem payments reasonably approximated expenses and were not simply an hourly supplement; plaintiffs appealed.
- First Circuit examined the company formula, the DOL Field Operations Handbook §32d05a(c), and FLSA regular-rate principles and reversed, directing partial summary judgment for plaintiffs on liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether per diem is part of the FLSA "regular rate" because it varies with hours worked | Per diem reductions show it was tied to hours; thus it functions as a wage supplement and must be included in the regular rate | Per diem was a reimbursement based on days and only reduced for an early end to a workweek, not as an hourly wage | Held: Per diem was impermissibly based on and varied with hours worked; it is part of the regular rate |
| Whether employer's prorating method complied with DOL Handbook §32d05a(c) | The formula produced an effective hourly per diem and thus contravened the Handbook's ban on payments that vary with hours | The company asserted reductions were for partial days (early week end) and not hours-based | Held: The formula used hours (hours/40) as the sole variable; therefore it contravened §32d05a(c) |
| Appropriateness of summary judgment | Plaintiffs sought partial summary judgment on liability given the formula evidence | Employer sought summary judgment in its favor asserting its affidavits and rounding differences showed no hours-based per diem | Held: District court erred; no genuine dispute as to liability once formula is examined — reversed and remanded for partial summary judgment for plaintiffs on liability and further proceedings on damages |
Key Cases Cited
- One Nat'l Bank v. Antonellis, 80 F.3d 606 (1st Cir. 1996) (standard of review for summary judgment)
- O'Brien v. Town of Agawam, 350 F.3d 279 (1st Cir. 2003) (exceptions to regular-rate rule are construed narrowly; employer bears burden)
- Bay Ridge Operating Co. v. Aaron, 334 U.S. 446 (1948) (regular rate must reflect what actually happens under employment arrangement)
- Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419 (1945) (regular rate is a factual inquiry, not a contractual label)
- Gagnon v. United Technisource, Inc., 607 F.3d 1036 (5th Cir. 2010) (DOL Field Operations Handbook is persuasive guidance)