Court rules employers cannot take overtime credit for paid lunches

The Fair Labor Standards Act does not require paid lunches for employees. Indeed, quite to the contrary, the FLSA provides that meal breaks (presumptively defined as breaks of more than 20 minutes during which the employee is totally relieved of his or her work duties) can be unpaid.

What happens, however, to an employee’s overtime compensation if the employer pays an employee for non-working lunches? Is the employer entitled to use the extra compensation for the paid lunches to offset other overtime compensation?

According to the 3rd Circuit in a case of first impression—Smiley v. EI DuPont de Nemours & Co.—the answer is “no.”

Nothing in the FLSA authorizes the type of offsetting DuPont advances here, where an employer seeks to credit compensation that it included in calculating an employee’s regular rate of pay against its overtime liability.

Instead, as the court points out, the FLSA only permits employers to take an offset against overtime payments in three limited circumstances, each of which involves some component of premium pay in excess of an employee’s regular hourly rate:

• Extra compensation provided by a premium rate paid for certain hours worked by the employee in any day or workweek because for hours worked in excess of eight in a day or in excess of the employer’s defined maximum workweek.

• Extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in non-overtime hours on other days.

• Extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective-bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the employer’s defined maximum workweek), where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek.

Come December 1, the DOL is adding more than four million employees to the doles of overtime eligibility. Employer are doing to look for ways to limit their overtime exposure to keep payrolls under control. Be aware, however, that taking a credit against overtime for paid lunches is one option not available to you.