Employers often try to manage overtime by adjusting schedules, staffing, or compensation models.
What they cannot do is manage overtime by adjusting the “regular rate” in a way that only shows up when overtime does.
That distinction mattered here.
TL;DR: A federal appeals court affirmed summary judgment for an employee where the employer reduced the employee’s non-overtime hourly rate only during overtime-heavy weeks and restored the higher rate once overtime stopped. Because the employer failed to identify any legitimate factor other than the length of the workweek to justify the reduction, the court treated the rate change as an impermissible device to evade the Fair Labor Standards Act’s overtime requirements. The court also affirmed a substantial award of attorney’s fees and mediation costs.
📄You can read the full decision here
A Rate Change That Appeared Only When Overtime Did
The case centers on whether an employer may reduce an employee’s hourly rate only during overtime-heavy weeks without violating federal overtime law.
For years, the employee worked a standard schedule and earned a steady hourly rate, with overtime paid at time-and-a-half when applicable.
That changed when the employer began scheduling the employee for at least 60 hours per week. At that point, the employer lowered the employee’s non-overtime hourly rate and paid overtime at time-and-a-half of the reduced rate.
The timing mattered.
The lower rate applied only during periods when the employee was regularly working overtime. Once the employer stopped scheduling overtime, it restored the higher hourly rate.
Those facts were undisputed.
The Legal Problem With the “Regular Rate”
The Fair Labor Standards Act requires overtime pay at one-and-a-half times the employee’s regular rate. And the regular rate is not a label the employer gets to choose. It is an actual fact based on what the employee is paid for non-overtime work.
Employers generally have flexibility to set hourly rates, subject to minimum wage and overtime requirements.
But that flexibility has limits.
The Eleventh Circuit underscored the boundary in its earlier decision, explaining that an “employer may reduce” its employees’ regular rates to accommodate scheduling preferences “so long as the rate reduction was not designed to circumvent the provisions (including overtime) of the [FLSA].”
Consistent with that principle, the court noted that a reduction in the regular rate cannot be justified solely by the length of the workweek. When the only reason for the lower rate is that the employee is working overtime, the reduction becomes an impermissible device to evade overtime obligations.
Employee Agreement Did Not Cure the Problem
The employer argued that the employee accepted the lower rate in exchange for guaranteed overtime hours and higher overall weekly pay.
That argument went nowhere.
Under the Fair Labor Standards Act, employees cannot contract away their right to overtime. Whether a pay arrangement makes economic sense to an employee is beside the point if the structure defeats the statute’s purpose.
The question was not consent. It was justification.
And the employer could not identify any legitimate factor other than overtime scheduling to explain the rate reduction.
Why This Is a Payroll-Design Case, Not a Timekeeping Case
This case did not involve off-the-clock work, missing time records, or falsified hours.
It involved payroll design.
Courts look closely at patterns like these:
- One hourly rate during non-overtime weeks
- A lower rate that appears only when overtime begins
- Restoration of the higher rate when overtime ends
- No explanation other than the number of hours worked
That pattern raises a red flag because it undermines the core purpose of overtime – placing financial pressure on employers and compensating employees for long workweeks.
Attorney’s Fees Can Eclipse the Wage Claim
The employer also challenged the attorney’s-fee award. The appellate court affirmed it.
The district court entered final judgment in favor of employee for $5,650.82, representing unpaid overtime compensation and liquidated damages. The fee award, however, exceeded $94,000, plus additional mediation costs.
That is a familiar wage-and-hour lesson. Even relatively modest overtime disputes can generate significant fee exposure when the pay practice itself is found unlawful.
Practical Takeaways for Employers
- Review any rate changes that correlate with overtime scheduling. Timing matters.
- Do not rely on employee acceptance or perceived fairness as a compliance strategy.
- Separate labor-cost management from wage-and-hour compliance decisions.
- Make sure HR, payroll, and operations understand how regular-rate issues arise.
- Assume that plaintiffs’ lawyers will analyze the math closely.
Bottom Line
Paying time-and-a-half is not enough if the regular rate is manipulated to make overtime meaningless.
If overtime disappears on a spreadsheet, courts are likely to notice – and the real cost may come later in attorney’s fees.