• Federal Court in Michigan Applies Equitable Principles and Allows Offsets from Different Pay Periods
  • March 26, 2010 | Author: Noel P. Tripp
  • Law Firm: Jackson Lewis LLP - Melville Office
  • The FLSA, as we know, is structured largely on a “workweek basis.” See, e.g. Bright v. Houston Northwest Medical Center Survivor, Inc., 934 F.2d 671, 678 (5th Cir. 1991). The standalone nature of each workweek can have draconian results for employers who overpay (intentionally or otherwise) in some workweeks, but underpay in others, as offsets generally only are available within the same pay period (and even then in limited circumstances). See, e.g. Herman v. Fabri - Centers of Am., 308 F.3d 580, 590 (6th Cir. 2002); Howard v. City of Springfield, Ill., 274 F.3d 1141, 1149 (7th Cir. 2001); also see Conzo v. City of New York, 2009 U.S. Dist. LEXIS 101949 (S.D.N.Y. Oct. 23, 2009)(observing that neither the FLSA nor DOL regulation define the time period for which offsets may apply).

    However, one line of cases, based largely in “equity” (i.e., fairness), and exemplified by Singer v. City of Waco, Texas, 324 F.3d 813, 817 (5th Cir. 2003), permits offset against FLSA damages for overpayments made in other workweeks within the limitations period, or for already used (though unlawful!) compensatory overtime taken by the employee/plaintiff within the period. The Singer line of cases permitting this ‘cumulative’ offset was cited with approval and applied last week in Bray v. Dog Star Ranch, 2010 U.S. Dist. LEXIS 21983 (W.D. Mich. Mar. 10, 2010).

    In Bray, two former employees had agreed to “bank” all hours worked over 40 in a workweek and take them as compensatory time in subsequent workweeks. This clearly violated the FLSA as “comp time” cannot be utilized in lieu of overtime with private sector non-exempt employees. However, during part of the time period at issue the employer paid the two employees for a full 40 hours, even when they worked fewer. In accepting the Defendants’ argument that they should receive a credit against overtime owed for those overpayments, Chief Judge Maloney wrote:

    Plaintiffs are entitled to be made whole; they are not entitled to a windfall at Defendants' expense. Equity requires Defendants be credited with overpayments made to Plaintiffs during their employment. During certain pay periods, Defendants paid Plaintiffs as though they worked forty hours a week, even though Plaintiffs worked less than the hours for which they were paid. Defendants are entitled to a credit for those overpayments. Accordingly, this court agrees with Defendants that they are entitled to an offset.

    Until the Supreme Court resolves these differing lines of case law, employers cannot rely with certainty on an offset defense based on overpayments in other pay periods. However, relevant circuit court decisions must be reviewed, as some courts do recognize this equitable defense.