New Manufacturing Overtime Law: Fixing What’s Wrong AND Breaking What’s Right

July 18, 2017Company, Employment Law, News

By:  Randall P. SuttonDavid Briggs

For those tracking recent developments with the overtime rules for manufacturers, the Oregon Legislature has finally weighed in and passed legislation that is awaiting the Governor’s signature.  The legislation is a mixed bag for employers.

The Recap

Unlike most employers, manufactures are required to pay daily overtime to employees who work more than 10 hours in a single day. As we have discussed in detail here and here, when an employee works both daily and weekly overtime during the same week, BOLI has for many years advised Oregon manufacturers (including mills, factories, canneries, driers, wineries, and other food processors) to pay the greater of either daily or weekly overtime.

BOLI unexpectedly changed its guidance earlier this year, advising employers to pay both daily and weekly overtime. This sudden shift exposed manufacturers to potential wage and hour claims for past underpayment of overtime and increased costs for operations going forward.

The Good News

The new law affirms the prior rule that manufacturers need only pay the greater of daily or weekly overtime. In other words, manufacturers should calculate each employee’s daily overtime (any time over ten hours in one day) and weekly overtime (any time over forty hours in one week) and pay the employee the greater of the two overtime rates (not both, as BOLI wanted).

The Bad News

As you should probably expect, the “Good News” section of this update is short.  The bad news is that the same law imposes strict weekly caps on the maximum hours employees can work in a manufacturing establishment.  Under the old rules, employees working for manufactures were limited to working 13 hours in a day .  That rule remains in effect.

However, manufacturing employees are now restricted from working more than 55 hours per workweek unless both the employee consents and a narrow exception applies.  There are two exceptions to the new 55-hour weekly cap:

  1. If the employer and employee agree in writing, the employee can work up to 60 hours in a week; or
  1. For manufacturers working with perishable goods (i.e., food processors, wineries, etc.), the employer may provide BOLI with a notice of undue hardship. During the undue hardship period claimed by the employer, which only lasts as long as perishable goods are being processed (and not more than 21 weeks), employees may consent to working up to 80 hours per week. During four of the 21 weeks, employees can consent to working up to 84 hours per week.

The law prohibits employers from “coercing an employee into consenting to work more than 55 hours in a given workweek.”  Only those employees who have consented in writing may work the undue hardship hours. So, employers will need to be careful that supervisors and managers are not pressuring employees to work more than 55 hours in a week as a condition of employment. Any proof of coercion opens the employer to potential liability.

The New Rules Don’t Apply to Everyone

Similar to the original rule, the new overtime rules do not apply to an employee who works for a manufacturer performing principally administrative tasks. The new rules also do not apply to employees who are required to make necessary repairs to equipment.

The 80/84 Hour Undue Hardship Exemption Further Explained

In order for an employer to receive the undue hardship exemption allowing its employees to work up to 84 hours in a week, the employer must be one that in the ordinary course of its business, processes perishable products.

In order to take advantage of the exemption, employers will need to provide a written notice to BOLI (on a BOLI provided form that has not yet been drafted) that includes a detailed description for the reasons for the needed exemption along with the start and expected end dates of the undue hardship period.  Once approved, the employer will need to ask employees whether they want to work the additional hours, and have each employee who consents to working additional hours sign a written consent.

While there is no guidance at this point, it appears that manufacturers requesting the undue hardship exemption (for no more than 21 weeks) may still have employees sign a written consent allowing them to work up to 60 hours per week for the remainder of the year.

The Ten-Hour Rule

In addition to the new caps on the number of hours worked by employees, manufacturers will need to ensure that their employees have at least ten hours off between shifts when the employee’s previous shift was eight hours or more. There is an exception to the 10 hour rule in the event of a disruption in business operation cause by power outage, major equipment breakdown or severe weather or similar emergency.

And a Little More Bad News for Good Measure: Employees Can Sue

The law also creates a private right of action for employees to sue employers for violations of the new rules.  Under the new law, an employee can sue for allowing/requiring work in excess of the applicable overtime limits within a single week (again, normally that will be 55 hours, but could be 60, 80, or 84 hours) or if an employer allows an employee to work more than thirteen hours in a single day.

If a manufacturer violates the law, the employee will be entitled to:

  1. The greater of $3,000 or actual damages for violation of the law (it is difficult to imagine a scenario where an employee who is paid for hours worked in excess of the statutory cap will be entitled to more than $3,000);
  1. An amount equal to twice the employee’s overtime wages earned during the period of violation; and
  1. Any other relief that a judge believes is just under the circumstances (i.e., an order prohibiting an employer from further violations.

BOLI may impose civil penalties of $2,000 – $3,000 per violation on employers who coerce employees to work more than 55 hours per week. The penalty is calculated as one violation per work week per employee. Given that every employer who claims an undue hardship exemption is required to file a notice, BOLI is well situated to impose and enforce penalties.

Conclusion

In light of these changes, employers in manufacturing establishments must review their overtime policies to ensure they are compliant. Fortunately, we will have a little time to sort out the new weekly limitations, as those don’t go into effect until January of 2018.  If you would like further information on this bill, or if you have any questions regarding how this bill might affect your business, please contact us.

Randall Sutton & David Briggs are partners in the firm’s Employment Law & Litigation practice group. The information in this article is not intended to provide legal advice. For professional consultation, please contact David Briggs at Saalfeld Griggs PC.  503.399.1070. [email protected]

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