The following two private legal opinions address issues related to paying employees who work for both the NPC and VA at a rate equal to time and a half overtime when combined hours from both jobs exceed forty in a week.

• Overtime requirement for “joint employment"
• Hiring an exempt VA employee for NPC work done on an hourly basis

SEMLER & PRITZKER
ATTORNEYS AT LAW
1742 N STREET, N.W.
WASHINGTON, D.C. 20036
(202) 872-9595

June 9, 1992

You have asked my opinion whether Veterans Administration laboratory research employees who are not exempt from the federal overtime payment statute (“Fair Labor Standards Act” or “FLSA”), are required to be paid time and one half overtime for similar work they perform for nonprofit corporations in VA laboratories when combined hours from both jobs exceed forty in a week. My opinion is that overtime is required to be paid in these circumstances.

Factual Background

The Veterans Administration employs laboratory technicians to work in its medical research laboratories. These persons are employees of the federal government.

Nonprofit research corporations have been established by VA professional staff to receive private grants to perform research on specified projects which are different from but related to VA research work. This research is performed by the same laboratory technicians and nurses in the same VA labs and clinics in which they regularly work. However, when performing such work they are employees of and are paid by the nonprofit corporation. These-research projects are at all times considered to be VA projects and are conducted for the benefit of the VA.

Discussion

Under the FLSA, all hours of work of a non-exempt employee over forty in a week are required to be paid at time and one half the employee's regular rate of pay.

Obviously, when a person has two different jobs with two entirely different employers, working, for instance, 40 hours for one and 20 hours for the other in the same week, neither employer owes overtime.

Where however, the two employers have some degree of interrelationship, they may be deemed by the U.S. Department of Labor as "joint employers" for FLSA purposes. The effect of such a finding is to treat both separate employers as one, such that the forty hour trigger for overtime purposes is tripped by the cumulative number of hours worked for both employers in the work week. The USDOL's joint employer regulations, 29 CFR 791 (enclosed) state that joint employership will be found concerning an employee's work for two separate employers unless both employers are "completely disassociated" and, conversely, will be found where the work "simultaneously benefits" both employers.

The courts have applied this regulation to find joint employership where the employee worked for employers who were formally separate. See, for instance, Secy of Labor v. Radio-TV Corp., 16 WH 372 (D.Hi. 1964), where an employee worked a forty hour work week for a TV distributor and held a second different job with a separate but commonly owned manufacturing company which made parts sold to the distributor. The court found joint employership, and consequently overtime liability, noting that "there was a direct and mutually beneficial connection or relationship between the businesses of both corporations ... [Regardless of the innocent intent of the defendants [the evidence] establishes a situation intended to be covered by the statute." (id at 375, 376); Secy of Labor v. Office Commun. Co., 17 WH 84 (MD NC 1965) -- joint employership created overtime liability where clerk of corporation also did work for corporation president's CPA practice at the corporate job site; Karr v. Strong Detective Agency, 26 WH 1670 (ED Wi. 1984) -- employee of detective agency assigned to work as employee of warehouse to perform undercover surveillance. Joint employership was found because the two employers were not acting "entirely independent of each other" nor were "completely disassociated" with respect to the employment.

Here, the arrangement is decidedly for the mutual benefit of the VA and the nonprofit corporation since the VA uses the corporation as an indirect vehicle for obtaining private funding of VA research projects performed in the same VA labs and clinics, using VA staff and equipment, under supervision of VA investigators who also are members of the nonprofit corporation. At bottom, what we have here is a mechanism of private funding of VA research projects performed in VA facilities by VA staff for the benefit of the VA and the, nonprofit corporation.

For these reasons, I believe overtime payment would be required under DOL regulations to any nonexempt VA employee who worked over 40 combined hours in a week for both the VA and the nonprofit corporation. Employees have a statutory private right of action and can collect double damages for a willful violation, and attorneys' fees. The Secretary of Labor independently has enforcement authority as well.

Please call if this raises any additional questions.

Sincerely,
SEMLER & PRITZKER

Steven R. Semler

SRS/sp

Enclosure

SEMLER & PRITZKER
ATTORNEYS AT LAW
SUITE 610
5301 WISCONSIN AVE, N.W.
WASHI'NGTON, D.C. 20015
(202) 537-9595

September 11, 1998

Ms. Barbara F. West, Executive Director
NAVREF
Suite 300
5018 Sangamore Road
Bethesda, Maryland 20816

Re: Overtime Pay Issues Arising From NRC Employment In A Part Time Capacity Of Persons Who Work In Full Time Jobs For Veterans Administration

Dear Barbara:

In my opinion letter to Richard Levine of June 9, 1992, I opined that if a nonprofit research corporation ("NRC") affiliated with a Veterans Administration hospital ("VA") hires on a part time basis an employee who works full time for VA in a non-exempt position, the hours of work in both jobs in a week are required to be combined, resulting in required overtime payment for the employee's combined hours worked over 40 in the week. That analysis still applies now.

You now raise two additional questions, identified and discussed below. In summary, (1) the hiring of a full time exempt VA employee to work on a part time hourly basis for an NRC will not result in loss of exempt status, provided such part time NRC work does not exceed 20% of total combined hours worked in a week; and (2) the morale problem attributable to VA employees receiving overtime in the NRC job whereas non-VA employees do not receive overtime, is susceptible to correction by administrative management of hours and/or hiring of part time personnel.

You advise an employee, such as a nurse, may work in an FLSA/exempt job for VA hospital. By definition, such exempt employee receives a salary for all hours worked for VA and therefore does not receive time and one half for hours worked over 40 in a week in the VA job. If the same employee also takes an additional job on a part time basis (e.g. also as a nurse) on an hourly pay basis for an NRC which is related to the VA, you ask if this payment on an hourly basis serves to destroy the "salary" requirement for over-time exempt status -since "salary" status requires payment of a flat amount irrespective of hours worked in a week, rather than an hourly rate. This is important because, if "salary" status is deemed defeated by payment of an hourly rate, then "exempt" status may be lost, with the consequence of the employee thereby becoming statutorily entitled to overtime for all hours over 40 in a week combined from both jobs performed by the related employers.

As a general rule, USDOL strictly requires that in order to qualify for an overtime exemption as a bona fide executive, professional or administrative employee, the employee must be paid on a salaried basis. 29 CFR §541.118. It has thus been ruled that calculation of pay on an hourly basis -- such as hourly reduction for part of a day's absence -- was the antithesis of salary (salary being deemed weekly payment irrespective of hours worked in the week) -- triggering loss of salary status and back-pay overtime obligations. Secy. of Labor v. Malcolm Pirnie Inc., 949 F.2d 611 (2nd Cir. 1991). Some courts have extended that hourly "reduction" principle to hold that even payment of an hourly rate supplement on top of salary was inconsistent with the "salary" (fixed pay irrespective of hours) requirement for overtime status, similarly triggering loss of "salary" status. Hilbert v. Dist. of Columbia, 788 F. Supp. 597 (DDC 1992), reversed in part, 23 F.3d 429 (D.C. Cir. 1994). Subsequently, USDOL has since clarified its position, ruling that where the employee otherwise satisfies bona fide exempt status, including being paid salary, such status is not lost if the person also receives an hourly rate supplement for additional work, -provided the hourly work is less than 20% of the week's total hours worked. See USDOL Administrator's Opinion letter dated February 25, 1997 (below). Hence, an exempt VA nurse also can work a part time job for an NRC on an hourly paid basis, but I would recommend not exceeding 20% of the week's hours in NRC work, since doing more could result in loss of salary status and trigger an overtime obligation for up to three years, subject to possible statutory doubling amount and attorney's fees.

You advise that a morale problem is created by the situation of an NRC employing part time VA nurses who receives overtime and other nurses who do not receive overtime because their full time jobs are with unrelated (non VA) employers. You ask if this morale problem can serve to excuse the requirement of time and one half payment to the person who works full time for the VA.

To begin with, I assume the VA employee who is receiving overtime is non exempt with the VA. If such nurse is exempt, the person can get straight time pay for the part time job, subject to the 20% hours cap discussed above. Even with respect to non exempt VA employees, the inconsistency in rate attributable to overtime rate paid to some employees but not others in their same part time jobs results from the USDOL rule that all of a non exempt employee's hours of work in a week performed for related employers be combined and hence triggering overtime rate entitlement for such hours over 40 in a week. The morale problem is not an excuse for non compliance. It may be disarmed only by managing hours or hires. For instance, the NRC might decide to not hire VA nurses, or might decide only to hire exempt nurses and limit their hours to the 20% cap above. Alternatively, if it does have to hire non exempt VA nurses, and they actually work only 35 or 37.5 hours per week in their full time jobs for the VA, then their additional weekly hours for the NRC can be managed to not exceed a combined total of 40 in the week for the NRC. As a further alternative, the NCR may decide to hire only VA nurses, effectively paying everyone time and one half, or it may decide not to hire any VA nurses, thereby paying everyone straight time.

Please let me know if this raises further questions.

Sincerely,

SEMLER & PRITZKER

Steven R. Semler

SRS/sp

Salary Basis/Nonexempt Overtime Work
[February 25, 1997]

This responds to your letter of October 16, 1996, concerning the application of the Fair Labor Standards Act (FLSA) to a salaried exempt employee. This executive, administrative, or professional employee works a full workweek in his exempt position and then works up to eight additional hours on rare occasions in a nonexempt position for the same employer.

The FLSA is the Federal law of most general application concerning wages and hours of work. An employee who is covered under this law and not otherwise exempt must be paid a minimum wage of not less than $4.75 an hour for all hours worked and not less than one and one-half times his regular rate of pay for all hours worked in excess of 40 in a workweek.

Section 13(a)(1) of the FLSA provides a complete minimum wage and overtime pay exemption for any employee employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in the Regulations at 29 C.F.R Part 541. An employee may qualify for exemption if all the pertinent tests relating to duties, responsibilities and salary, as discussed in the appropriate section of the regulations, are met. One such test requires that an otherwise exempt employee devote no more than 20% (40% for a retail or service establishment employee) of his hours worked in the workweek to nonexempt work.

An exempt employee must be paid on a salary basis, as described in section 541.118 of the regulations. As stated in section 541.118, an employee will be considered to be paid "on a salary basis" if under his or her employment agreement he or she regularly receives each pay period on a weekly, or less frequent basis, a predetermined, amount constituting all or part of his or her compensation, which amount is not subject to reduction because of the quality or, quantity of the work performed.

There is no requirement that the exempt employee be paid for extra work in a nonexempt position. However, it should be noted that if the employee devotes more than 20% (40% for a retail or service establishment employee) of his time in the workweek to the extra work, he will not be classified as an exempt employee for the workweek and must be paid the full minimum wage and overtime compensation during that workweek at a regular rate determined by dividing his full salary for that week, by 40 hours. If the employee loses the exemption on a regular and recurring basis, we would question whether the employee is actually an exempt employee, and the exemption may be denied in all workweeks in which it is claimed, including those weeks when no work in, the nonexempt position was performed.

It has been our longstanding position that additional compensation besides an exempt employee's guaranteed salary is not inconsistent with the salary basis of payment. Thus, extra compensation by the hour for hours worked in excess of 40 in a workweek would not defeat the exempt status of an otherwise exempt employee.

I trust that this satisfactorily responds to your inquiry.