Ninth Circuit Okays Hospital's Pay Plan for Nurses with Different Rates for Different Length Shifts

The U.S. Court of Appeals for the Ninth Circuit has held an employer did not violate the Fair Labor Standards Act by paying employees on a 12-hour shift a lower base salary than those working on an 8-hour shift in an attempt to keep overall pay revenue-neutral. Parth v. Pomona Valley Med. Ctr., No. 08-55022 (9th Cir. Oct. 22, 2009). The Court refused to invalidate the parties’ agreement concerning wage rates, stating, “[The] 12-hour shift scheduling practice was first initiated at the nurses’ request. The 12-hour shift scheduling practice was then memorialized in a collective bargaining agreement . . . . The parties do not dispute that the wages paid under the pay plan are more than the minimum wages under federal law.” Because the pay plan was not unlawful, the employee’s FLSA claim failed and the Court affirmed summary judgment in favor of the employer. The Ninth Circuit has jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

Louise Parth worked as a nurse at Pomona Valley Hospital Medical Center. In 1990, Pomona, responding to its nurses’ requests for 12-hour shifts so they would have more days off each week, developed and implemented an optional 12-hour shift schedule and pay plan. Before that time, Pomona scheduled nurses on 8-hour shifts. The pay plan allowed nurses to work a 12-hour shift schedule at a lower base salary. As a result, nurses who volunteered for the 12-hour shift schedule made approximately the same amount of money as they made on the 8-hour shift schedule. After Pomona made the shift available, many nurses opted to work 12-hour shifts, including Parth. Parth said she chose to work 12-hour shifts in 1993 because it gave her more flexibility in her schedule.

In 2003, Pomona’s nurses voted to unionize and negotiated a collective bargaining agreement with Pomona. The CBA included a lower base rate for a 12-hour shift than an 8-hour shift. Parth, who was a member of the bargaining committee, signed the agreement and continued to work 12-hour shifts. Two years after ratification of the CBA, Parth filed a class action against Pomona, alleging that the 12-hour shift pay plan violated the FLSA. The district court granted Pomona’s motion for summary judgment, and Parth appealed.

Parth argued the pay plan was unlawful because the FLSA permitted employers to create a cost-neutral pay plan only “before the employer was subject to the FLSA.” The Court disagreed. The Court noted that under the FLSA employers are “generally free to establish the regular rate at any point and in any manner they see fit,” as long as the minimum hourly rates established by the FLSA are respected. Further, the U.S. Supreme Court has held compensation practices where employers lowered the hourly base to ensure they paid employees the same wages overall after complying with the FLSA’s overtime requirement were lawful. Walling v. A. H. Belo Corp., 316 U.S. 624, 628-30 (1942). The Supreme Court stated, “[N]othing in the [FLSA] bars an employer from contracting with his employees to pay them the same wages that they received previously, so long as the new rate equals or exceeds the minimum required by the [FLSA].”

The appellate court further noted the pay plan was consistent with the FLSA’s overall purpose, which is to ensure employees receive a “fair day’s pay for a fair day’s work.” The Court found the pay plan, sought by the nurses and eventually agreed to by their union, ensured that employees who worked more than 8 hours a day received time-and-a-half overtime pay. Nurses who worked more than 12 hours a day received double-time. Accordingly, the Court concluded the pay plan properly protected the nurses from “the evils of overwork and underpay.” Thus, the Court held Pomona’s pay plan was not prohibited by the FLSA and was consistent with the law’s purpose.

Parth then argued that Pomona’s pay plan violated the FLSA because it was an artifice designed to avoid the FLSA’s overtime and maximum hour requirements. The Court again rejected Parth’s argument. Parth produced no evidence to show the regular rates memorialized in the CBA were artificially low, or Pomona set pay rates in a manner that would relieve it of overtime obligations. Further, Parth and the other nurses were paid overtime under the pay plan using an authorized method of calculating the regular rate known as the “weighted average method,” set forth in federal overtime regulations (29 C.F.R. § 778.115) and the CBA. Because Parth failed to produce any evidence that the pay plan violated the FLSA, her claim failed.

This case confirms that health care employers may set different pay rates for different length shifts to maintain revenue neutrality, as long as they otherwise comply with the minimum wage and overtime requirements of the FLSA and other applicable law.