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Court Rules on New Mexico’s “Flat Rate” Overtime Exemption

The New Mexico Minimum Wage Act, which governs overtime pay in New Mexico, contains an exemption not found in the federal overtime laws. The NMMWA requires employers to pay premium rates for overtime hours worked by employees (i.e., those hours in excess of 40 hours per week). NMSA § 50-4-22(E). The Act, however, does not apply to “salespersons or employees compensated upon piecework, flat rate schedules or commission basis.” NMSA § 50-4-21(C)(4). Employers sued under the NMMWA often contend that workers paid straight time or day rates fall within this exemption. However, a federal court has recently rejected this argument. In Martinez v. Fedex, a former worker sued FedEx, claiming that FedEx drivers and runners are paid a “day rate” whereby they earn the same amount of money regardless of how many hours they work in a day. Defendant moved to dismiss the single claim in the complaint, arguing that the “day rate” Plaintiff received is the equivalent of a “flat rate” and therefore the NMMWA did not apply to Plaintiff. On March 17, 2021, Judge Yarbrough issued an order denying the motion to dismiss. In the opinion, the Court found that the phrase “flat rate schedule” as used under the NMMWA, means systems that are commission based, in which a worker receives payment per unit or per job, rather than per time worked. As such, the Court held that “[w]hatever the precise definition of ‘flat rate schedules’ in § 50-4-21(C)(4), it does not encompass the concept of a fixed day rate that compensates an employee per unit of time worked, without respect to unit of work completed or a standardized estimate of payment per job.” Thus, the Court denied the motion to dismiss based on the flat rate exemption. 

This ruling is an important clarification of the NMMWA’s flat rate exemption. It is a proper interpretation of the exemption. If the Defendant’s interpretation were correct, this would render the NMMWA a virtual nullity. Workers who are paid salaries are paid a fixed amount on a weekly, bi-weekly, monthly or annual basis, and thus would, under Defendant’s logic, fall under the “flat rate schedule” exemption. Similarly, those who are paid “straight time,” meaning they are paid a “flat” hourly rate for each hour worked, even those above forty in a week, would likewise be found to fall under the “flat rate schedule” exemption. This is, of course, nonsense. Day rates, salaries and straight time are regularly alleged to violate the NMMWA, and the New Mexico legislature could not have intended to create a blanket exemption for all such payment schemes.  This is a positive ruling for all workers in New Mexico, but especially for those in the oilfields, as day rates are commonly paid to those working in the oil and gas industry.  

If you have been denied overtime pay within the past three years, speak with an experienced overtime attorney today. Josh Borsellino is an attorney licensed in Texas who regularly represents workers suing for unpaid overtime. Call (817.908.9861) or email Josh today for a free evaluation of your overtime matter. 

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