As previously discussed in this blog, many (if not most) courts agree that an employee who receives a fixed salary for varying hours of work has a “clear mutual understanding” with his/her employer that such salary covers all hours of work, and that in the event overtime is deemed owed because the employee was not properly classified as an exempt salaried employee, such overtime should be paid pursuant to the half-time calculation. Following a trial, Judge John Steele of the United States District Court for the Middle District of Florida, recently ruled that this half-time calculation is also appropriate when the plaintiff was misclassified as an independent contractor. Crumpton v. Sunset Club Props., L.L.C., 2011 U.S. Dist. LEXIS 83987 (M.D. Fla. Aug. 1, 2011).
Plaintiff Crumpton was a real estate broker whose job it was to market the Defendants’ low income housing units. She characterized the monthly payments she received (in addition to commissions for finding tenants for the units) as a salary which only covered her first 40 hours of work. Defendants maintained that the payments were a monthly draw against commissions, and in any event were intended to compensate her for all hours worked. She estimated that she worked in excess of 30 hours of overtime each week, and that she had not received any compensation for her overtime hours under the FLSA. The court disagreed, observing that where “certain conditions are met…the [overtime] rate is reduced to ‘half-time.’” Id. at 11. The Court went on to find that plaintiff’s receipt of the fixed salary satisfied this test. Id. at 12 citing Clements v. Serco, Inc., 530 F.3d 1224 (10th Cir. 2008).
While many courts have adopted the reasoning articulated in Crumpton, thereby limiting exposure for overtime damages to half-time, until there is a governing Supreme Court decision, employers cannot be certain as to how a court will calculate damages. To bolster the argument that a half time calculation is appropriate, Employers should continue to take measures to refute any arguments that an aggrieved individual may make that any salary paid to any employee (or contractor) was not intended to compensate that worker for all hours worked and/or services performed. Language in offer letters or agreements is invaluable in making such an argument.