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Understanding the Differences Between Federal and New Mexico Overtime Laws, and Why They Matter

By: Josh Borsellino and Morgan Scott

I.  INTRODUCTION

Federal and state laws sometimes overlap when it comes to regulating overtime pay. The federal statute is known as the Fair Labor Standards Act (“FLSA”). Some, but not all, states have their own overtime laws. Texas, for example, does not – thus employees who seek overtime pay in Texas will assert those claims under the FLSA. In those states that have their own overtime laws, an employee may seek overtime pay under either the state statute or the FLSA. One state that has enacted a powerful overtime statute is New Mexico, as its statute is known as the New Mexico Minimum Wage Act (“NMMWA”). This is consequential for oilfield workers because the Permian Basin extends from Texas into New Mexico, and thus many oilfield workers who work in Texas will also do work in New Mexico, and if so they are subject to the NMMWA for the time they worked in New Mexico. What follows is a discussion of the key differences between the FLSA and the NMMWA.

II.  GENERAL OVERVIEW OF THE FLSA AND NMMWA

FLSA

The FLSA is the federal statute that controls the provisions for paying minimum wage and overtime pay. “The principal congressional purpose in enacting the FLSA of 1938 was to protect all covered workers from substandard wages and oppressive working hours, labor conditions [that are] detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers.” Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739 (1981)(quoting 29 U.S.C. § 202(a)). 

Under the FLSA, employers are required to pay their non-exempt workers time and a half the workers regular rate of pay for all hours worked over 40 in a given work week. The regular rate to which an employee is employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the DOL’s regulations. Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as a bona fide executive, administrative, professional, computer and outside sales employees. There are a litany of other exemptions that may apply under the FLSA, but for brevity’s sake this article will not cover them. 

The FLSA provides five means of enforcement: 

  1. criminal prosecutions for willful violators, see 29 U.S.C. § 216(a); 
  2. individual civil causes of action to recover unpaid minimum wages, overtime compensation and certain liquidated damages, see 29 U.S.C. § 216(b); 
  3. collective actions to recover damages, see 29 U.S.C. § 216(b); 
  4. a cause of action allowing the Secretary of the Department of Labor to recover employees’ damages and for additional recovery of “an equal amount of liquidated damages,” 29 U.S.C. § 216(c); and 
  5. a suit for injunctive relief, see 29 U.S.C. § 217. 

NMMWA

The New Mexico Minimum Wage Act (“NMMWA”) states that under Section 50–4–22(D) of the MWA, workers “have a right to compensation at one and one-half times their regular hourly rates for all hours worked in excess of 40 hours” during a seven day period. See Section 50–422(D) (“An employee shall not be required to work more than forty hours in any week of seven days, unless the employee is paid one and one-half times the employee’s regular hourly rate of pay for all hours worked in excess of forty hours.”). Under section 51-4-1(A), an employer includes every person, firm, partnership, association, corporation, receiver or other officer of the court of this state any any agent or officer… employing any person in this state, except employers of livestock and agricultural labor.”

Under section 50-4-2(A) regarding when employees are to be paid, “an employer shall designate regular pay days, not more than sixteen days apart, as days fixed for the payment of wages to all employees.” The purpose of the NMMWA is “to safeguard existing minimum wage and overtime compensation standards which are adequate to maintain the healthy, efficiency, and general well-bring of workers against the unfair competition of wage and hours standards which do not provide adequate standards of living.” Section 50–4–19. The regular rate to which an employee is employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee. The regular rate is properly calculated by adding all of the wages payable for the hours worked and dividing it by the total number of hours worked. 

III.  STATUTE OF LIMITATIONS 

FLSA 

The statute of limitations for an action for unpaid overtime wages under the FLSA has a two-year timeline for recovery, but the plaintiff may go back an additional third year if the plaintiff can show that the defendant’s violation of the statute was willful. Mireles v. Frio Foods, Inc., 899 F.2d 1407 (5th Cir. 1990); see also 29 U.S.C. § 255 (“Any action … may be commenced after two years, … except that a cause of action arising out of a willful violation may be commenced within three years.”). 

Willful violations occur when “the employer either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA.” McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988)(citing Trans World Airlines, Inc. v. Thurston, 469 U.S. 111 (1985)). The Code of Federal Regulations defines reckless disregard as the “failure to make adequate inquiry into whether conduct is in compliance with the act.” 5 C.F.R. § 551.104 (2011). An employer acts willfully when they know their pay structures violate the FLSA or ignore complaints brought to their attention by their employees. See, e.g., Ikossi-Anastasiou v. Bd. of Supervisors of La. State Univ., 579 F.3d 546, 553 & n.24 (5th Cir. 2009) (citing cases). A finding of willfulness is appropriate where the employee can show, for example, that the employer had actual notice or knowledge of the requirements of the FLSA, had an agreement to pay unpaid overtime wages, or gave assurances for future compliance with the FLSA. “The Fifth Circuit has held that an action is willful when ‘there is substantial evidence in the record to support a findings the the employer knew or suspected that his actions might violate the FLSA.’ Stated most simply, the question remains, did the employer know the FLSA was in the picture?” McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988); see also Coleman v. Jiffy June Farms, Inc., 458 F.2d 1139, 1142 (5th Cir.)(cert. denied, 409 U.S. 948 (1972)). Therefore, the statute of limitations for FLSA overtime violations can be extended to three years if the violation was willful. 

Tolling is critical in FLSA collective actions because the limitations period for each potential class member continues to run until they file a consent form to opt into the lawsuit. Essentially, their claims continue to diminish or even become obsolete the longer they wait to fill out a consent to sue form. Therefore, a collective action member’s FLSA claim is not tolled until he or she files a Consent to Sue form. See Charlot v. Ecolab, Inc., 97 F. Supp. 3d 40 (E.D. New York 2015)(“Potential members of a class action are parties to the litigation and toll the statute of limitations upon the filing of the class action is filed, unless they later opt out, but putative class members in a FLSA collective action become members and toll the statute of limitations only after they opt-in and file a consent to sue letter.”); See also 29 U.S.C. § 256; D’ Arpa v. Runway Towing Corp., No 12 Civ. 1120(JG), 2013 WL 3010810, at *5 (E.D.N.Y. June 18, 2013). 

Courts apply the doctrine of equitable tolling “as necessary to avoid inequitable circumstances” and “to prevent unfairness to a plaintiff who is not at fault for his or her lateness in filing”; this is particularly true in cases where absent collective members may face injustice before they have an opportunity to join the case, such as where their claim expires or substantially diminishes before the collective has been conditionally certified. See, e.g., Iavorski v. U.S. Immigration & Naturalization Serv., 232 F.3d 124, 129 (2d Cir. 2000). While equitable tolling may be available to stop limitations from running in certain FLSA collective actions, plaintiffs must show that they pursued their rights diligently and that there are extraordinary circumstances that support their request for tolling. See Dyson v. Dist. of Columbia, 710 F.3d 415, 421-22 (D.C. Cir. 2013).

NMMWA 

The NMMWA provides a three year limitations period for all claims brought under the statute. NMSA 1978 § 37-1-5 (2009). Thus, unlike the FLSA, a NMMWA claimant does not need to prove a willful violation to extend the limitations period from two years to three. The NMMWA also contains a provision which can significantly extend the applicability of the statute of limitations. “[A] civil action to enforce any provision of [the NMMWA] may encompass all violations that occurred as part of a continuing course of conduct regardless of the date on which they occurred.” NMSA 1978 §§ 37-1-5; 50-4-32. While caselaw interpreting this provision is sparse, at lease one federal district court in New Mexico has read § 50-4-32 to mean exactly what its plain language clearly states. In Olivo, Judge Black stated that “because the current version of § 50-4-32 of the Act provides that where a continuing course of conduct is involved, there is essentially no limitations period for claims [asserted under the NMMWA].” See Olivo v. Crawford Chevrolet, Inc., No. Civ. 10-782 BB/LFG (D. N.M. September 20, 2011). 

Moreover, because NMMWA claims may be aggregated through the filing of a class action under Fed. R. Civ. P. 23, the NMMWA claims for all class members of the proposed class are automatically tolled once the case is filed. This is very different from a FLSA collective action filed under the FLSA, as explained above, because limitations on the claims of each member of the collective class continue to run until that member files a consent form in the lawsuit. Because it can take many months for the plaintiff in a FLSA collective action to file a motion for conditional certification, and then to get a favorable ruling, the running of limitations in a FLSA collective action case can make a significant difference in the value of the claims of the members who opt in. But under the NMMWA, limitations for each class member stops running the day the class action is filed. See Charlot v. Ecolab, Inc., 97 F. Supp. 3d 40 (E.D. New York 2015) (“In contrast to the tolling rules applicable to FLSA collective actions, the statute of limitations for potential state law class claims is tolled by the filing of the class claim”) (citing Giovanniello v. ALM Media, LLC, 726 F.3d 106, 115 (2d Cir.2013)).

So, here is a chart that summarizes the key differences between the two laws with respect to the statute of limitations:

IssueFLSANMMWA
Limitations PeriodCan seek overtime pay for work performed within the last two years prior to filing suit, and can go back three years if it is shown that the defendant’s violation of the statute was willfulCan seek overtime pay for work performed within the last three years. 
Continuing Course of ConductN/ACan seek overtime pay for work performed beyond three years if he can show the defendant engaged in a continuing course of conduct. In essence, if the violation is ongoing at the time suit is filed (or, possibly, was ongoing but ended sometime within the past three years), the claimant (and presumably other class members) can seek overtime for all work performed during the course of the ongoing violation. 
Tolling for Class MembersLimitations continues to run for each member of the proposed collective class until such member files an FLSA consent with the CourtLimitations is tolled for all class members once suit is filed

IV.  TREBLE DAMAGES V. DOUBLE DAMAGES

FLSA

The FLSA permits only liquidated, or double, damages, and only if the defendant does not establish a good faith basis for its violation of the law. Liquidated damages are intended to compensate the employee for being deprived of their rightful wages. An award of liquidated damages is equal to the amount the claimant is owed in unpaid overtime. So, for example, if the claimant is owed $10,000 in unpaid overtime, he or she could receive an additional $10,000 as liquidated damages for a total of $20,000 in FLSA damages. Employers are able to avoid paying liquidated damages if they can prove that they acted in good faith and reasonably believed that they were not required to pay the overtime wages. The employer cannot be ignorant of the FLSA. 

Section 216 of the FLSA says that employers bear the substantial burden to demonstrate a “good faith and reasonable belief that their actions did not violate the FLSA.” Bernard v. IBP, Inc. of Nebraska, 154 F.3d 259, 267 (5th Cir. 1998); Mireles, 899 F.2d at 1415. Even if the district court determines that the employer’s actions were in good faith and based on reasonable grounds, the court has discretion to award liquidated damages. Id. Good faith requires a “duty to investigate potential liability under the FLSA,” and ignorance cannot be the basis of a reasonable belief. Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 469 (5th Cir. 1979). “It requires that an employer first take active steps to ascertain the dictates of the FLSA and then to move to comply with them.” Reich v. Tiller Helicopter Servs., Inc., 8 F.3d 1018, 1030 (5th Cir. 1993). “The burden under 29 U.S.C. § 260 is a difficult one to meet, however, and double damages are the norm, single damages are the exception.” Id. While the determination of willfulness for the purpose of establishing the statute of limitations is a fact question, the determination of good faith for pursues of establishing liquidated damages is a question of law. 29 U.S.C. § 260 (2006). The employer bears the burden to prove that the conduct was reasonable and in good faith. See Renfro v. Emporia, 948 F.2d at 1540. For purposes of assessing whether the employer meets its burden, “[t]he good faith requirement mandates the employer have ‘an honest intention to ascertain and follow the dictates of the [FLSA]. The additional requirement that the employer have reasonable grounds for believing that his conduct complies with the Act imposes an objective standard by which to judge the employer’s behavior.’” Id. (quoting Doty v. Elias, 733 F.2d at 725 ).


NMMWA

The NMMWA provides for treble damages – it specifically states an employer who violates the law “shall be liable to the employee[] affected in the amount of [his] unpaid or underpaid minimum wages plus interest, and in an additional amount equal to twice the unpaid or underpaid wages.” N.M. STAT. ANN. § 50-4-26(C) (2013); see also Rivera v. McCoy Corp., 240 F.Supp.3d 1150 (D.N.M. 2017) (NMMWA overtime claimant is entitled to treble damages). Rivera v. McCoy Corp., 240 F.Supp.3d 1150, 1161 (D.N.M. 2017) (awarding the claimant $6,411.60 in unpaid overtime wages; as well as $12,823.20 in treble damages). Employers who violate the NMMWA must pay treble statutory damages to the employee to not only compensate the employee for wage theft, but to deter employer’s from doing this again in the future. The purpose of statutory damages is not only to compensate employees for wage theft, but also to deter employer violations. Wage claims are subject to a three-year statute of limitations. NMSA 1978 §§ 37- 1-5; 50-4-32. This statute of limitations is tolled when the violation is part of a “continuing course of conduct.” Id. These provisions are meant to prevent employers from escaping liability for years of unchecked wage theft. See Jose Olivas, et al v. Celina Bussey, et al, No D-101-CV-2017-00139 (D.Ct. NM, 2017)

V.  INAPPLICABILITY OF THE FLUCTUATING WORK WEEK

The Fluctuating Work Week (“FWW”) method permits an employer to pay an employee “a fixed salary plus an overtime factor of one-half of the hourly rate, which hourly rate is calculated such that it decreases as the number of hours worked increases.” The FWW is essentially a method for paying overtime that many states, including New Mexico, have outlawed – under the FWW, a misclassified employee may be owed only half-time in damages, but if the FWW does not apply, the misclassified employee is owed one-and-a-half times their regular rate of pay in unpaid overtime. Thus, whether the FWW applies or not has the effect of tripling the damages available to the misclassified employee.

In order to compensate an employee under the FWW, an employer must meet the following criteria:

  1. “The employee’s hours must fluctuate from week to week;
  2. The employee must receive a fixed salary that does not vary with the number of hours worked during the week;
  3. The fixed amount must be sufficient to provide compensation every week at a regular rate that is at least equal to the minimum wage;
  4. The employee must receive at least 50% of his regular hourly pay for all overtime worked; and
  5. The employer and employee must share a clear mutual understanding that the employer will pay that fixed salary regardless of the number of hours worked.” 29 C.F.R. § 778.114.

FLSA

Under the FLSA, the FWW may apply if the employer satisfies certain criteria outlined by the Department of Labor. See 29 C.F.R. § 778.114; Samson v. Apollo Resources, Inc., 242 F.3d 629, 636 (5th Cir. 2001). This method of payment is an arrangement under which the employee receives “a fixed weekly pay for a fluctuating work schedule with a varying number of hours worked each week” and acts as an alternative to the requirement of overtime compensation. Black v. SettlePou, P.C., 732 F.3d 492, 496 (5th Cir. 2013). In the Fifth Circuit, this method may only be applied where the employee “clearly understands” that his salary “is intended to compensate any unlimited amount of hours [he] might be expected to work in a given week…” Hills v. Entergy Operations, Inc., 866 F.3d 610, 616 (5th Cir. 2017). The FWW method applies only if the following elements are met:

  1. the employee’s hours must fluctuate from week to week;
  2. the employee must receive a fixed salary;
  3. the salary must meet the minimum wage standards
  4. the employee and the employer must have a clear mutual understanding that the salary (not including overtime premiums) is fixed regardless of the number of hours the employee works; and 
  5. the employee must receive overtime compensation for hours worked in excess of forty hours, not less than one-half the rate of pay.

29 C.F.R. § 778.114(a); see also Brantley v. Inspectorate America Corp., 821 F. Supp. 2d 879 (S.D.Tex. 2011).

If theses criteria are met, then overtime for hours worked over 40 in a workweek may be paid at a rate of half the employee’s regular rate of pay, rather than at one-and-one-half times the regular rate of pay. Id. The theory is that the employee has already been paid for the time with the employee’s straight-time pay. Id. An employer utilizing the FWW method of payment may not make deductions from an employee’s salary for absences occasioned by the employee. 29 C.F.R. §778.114(c). This includes deductions for illness, sick leave, and personal business. WH Admin. Op. FLSA 2006-15 (May 12, 2006); WH Admin. Op. (May 18, 1966). Obviously, if the FWW applies, it is very significant because it operates to reduce the amount of overtime a misclassified employee would be owed by two thirds.

NMMWA

For claims under the NMMWA, the FWW cannot apply under any circumstances because the New Mexico legislature has expressly outlawed the application of the FWW under Section 50-4-22(C) of the NMMWA. See Dep’t. of Labor v. Echostar Commc’n Corp., 2006-NMCA-047, ¶ 7, 139 N.M. 493, 134 P.3d 780, 782 (N.M. Ct. App. 2006) (holding that calculating overtime based on a FWW is inconsistent with NMMWA Section 50-4-22(C)); see also Andrew v. Schumberger Tech. Co., 808 F.Supp.2d 1288, 1290-91 (D.N.M. 2011) (stating that “[b]ased on [Echostar], however, New Mexico no longer permits employers and employees in New Mexico to agree to use the FWW method to calculate the payment of wages for overtime hours.”). In 2012, a New Mexico court, comparing the FLSA and the NMMWA, expressly stated that “the fluctuating workweek method of calculating overtime, while acceptable under the FLSA, is inconsistent with Section 50-4-22(C).” Sinclaire v. Elderhostel, 287 P.3d 978, 981-82 (N.M. Ct. App. 2012). Thus, the FWW may never be used to calculate a misclassified employee’s overtime under the NMMWA. Thus, under the NMMWA, a misclassified employee would be owed three times what he would be owed under the FLSA if the FWW were to apply to his FLSA claims. 

VI.  OPT-IN V. OPT-OUT PROCEDURES

Rule 23 class actions are “opt out” cases, meaning that class members are included in the case unless they affirmatively decline to participate, while a Section 216 collective action is an “opt-in” case, in which members of the collective class must affirmatively opt to join the case to be included. As one court explained:

Historically, the FLSA’s opt-in mechanism has limited the size of the FLSA action, with estimates indicating that typically only between fifteen and thirty percent of potential plaintiff-employees opt-in. Rachel K. Alexander, Federal Tails and State Puppy Dogs: Preempting Parallel State Wage Claims to Preserve the Integrity of Federal Group Wage Actions, 58 Am. U.L.Rev. 515 (February 2009). The most probable explanation for the low response rate is the idea that the notice received in the mail is just another piece of junk that the recipient has neither the time nor the interest to read, let alone act on. Ellis v. Edward D. Jones & Co., 527 F.Supp.2d 439, 444 (W.D.Pa.2007) (citing Noah H. Finkel, Symposium, The Fair Labor Standards Act, State Wage-and-Hour Law Class Actions: The Real Wave of “FLSA” Litigation?, 7 Emp. Rts. & Emp. Pol’y J. 159, 161, 174 (2003)). This theory behind low opt-in rates in collective actions is also the most likely explanation for the low opt-out rates in Rule 23 class actions. Id. at 445. Because of these low opt-in and opt-out rates, Rule 23 classes are generally much larger than the corresponding § 216(b) collective action groups. Id. 

FLSA 

A collective action is similar to a class action in that it allows employees to sue on behalf of themselves as well as employees who are similarly situated.” Damassia v. Duane Reade, Inc., 250 F.R.D. 152 (S.D.N.Y. 2008). “In a collective action, only plaintiffs who affirmatively opt in can benefit from the judgment, whereas in a class action, potential class members are parties to the suit unless they affirmatively opt out.” Id. Also, as mentioned above, the statute of limitations for a collective action member continues to run on each individual’s claim until his/her consent to joinder is filed with the court. 

NMMWA

Class actions filed under the NMMWA in federal court are governed by Rule 23, and thus are opt-out cases. See, e.g., Gandy v. RWLS, LLC, 308 F.Supp.3d 1220 (D.N.M. 2018) (“the Court therefore concludes that Rule 23 and its opt-out notice provision apply to Plaintiff’s NMMWA claim brought on behalf of himself and others similarly situated.”). This means that class members must affirmatively file a document with the Court indicating their desire to be excluded from the case in order to not be bound by the result. Given that opt-in rates are only 15-30%, by filing a Rule 23 opt-out case, a plaintiff can increase the size of the participating class (and thus the potential recovery) by 60-85%, merely by filing a class action under the NMMWA rather than a collective action under the FLSA. 

VII.  EXEMPTIONS 

FLSA

The FLSA requires employers to pay their non-exempt employees to be paid time and a half for all hours worked over 40 in a given workweek. Section 13(a)(1) of the FLSA provides exemptions from minimum wage and overtime pay for employees who are employed in an executive, administrative, professional, computer employee, or outside sales capacity. The authors have previously written extensively on each of these exemptions, and will not discuss them in-depth in this article. For further reading on these exemptions, click here. 

NMMWA

A. The White Collar Exemptions

There are number of exemptions under the NMMWA; however, only a couple are frequently utilized and litigated like the professional exemption and the commission or flat-rate exemption, discussed below. The NMMWA provides for white collar exemptions, which are as follows: 

“Adopting the federal department of labor’s definition of “administrative, executive, and professional employee,” an employee is an exempt administrative employee, pursuant to 50-4- 21(C)(2) NMSA 1978, if the employee is compensated on a salary or fee basis at a rate of not less than $455 per week exclusive of board, lodging or other facilities, if the employee’s primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and if the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. Williams v. Mann, 2017-NMCA-012.” 

For an employee to qualify for the NMMWA’s executive exemption, he or she must: “(1) perform non-manual work related to the management of business as his primary duty; (2) exercise discretion; (3) regularly assist executive work or perform specialized work or assignments; and (4) perform less than 20 percent nonexempt work.” Rivera v. McCoy Corp., 240 F. Supp. 3d 1150, 1156 (D.N.M. 2017) (citing N.M. Admin. Code § 11.1.4.7(C)). The administrative exemption requires a finding that the employee’s primary duty consisted of office or non-manual work related to management policies or general business operations, and included work requiring the exercise of discretion and independent judgment. See Gagnon v. Resource Tech., Inc., 19 Fed. Appx. 745, 747-48 (10th Cir. 2001) (unpublished) (applying the FLSA’s definition of administrative exemption to the plaintiff’s NMMWA claim).

With respect to administrative, executive, and professional employee under the NMMWA statute, courts use the same duties test that is applied in the FLSA, above. Professional under the NMMWA means same thing under FLSA. For substantial evidence to support a finding that the employee is qualified as an exempt administrative employee:

“Where plaintiff brought a claim for unpaid overtime wages under the Minimum Wage Act (MWA), 50-4-19 to -30 NMSA 1978, the evidence presented at trial that plaintiff’s $600 weekly salary was higher than the minimum wage for non-exempt employees under the MWA, that plaintiff’s primary duties were related to management or general office operations, and involved the exercise of discretion and independent judgment with respect to matters of significance, including signing contracts with vendors, that plaintiff held herself out as an office manager, that plaintiff dealt with employee discipline and payroll issues, and that plaintiff managed patient information, including bill collection, insurance collection and payments, provided a substantial evidentiary basis for the district court to conclude that plaintiff was an exempt administrative employee under the MWA, and therefore not entitled to unpaid overtime wages. Williams v. Mann, 2017-NMCA-012.” 

In addition, NMMWA lists as white collar exemptions forepersons, superintendents and supervisors. To understand these exemptions, one must look to the NM administrative code, which provides that:

“Forepersons, superintendents and supervisors”, as used in Section 50-4-1(C)(2) of the Minimum Wage Act means an employee who meets all of the following requirements: 

  1. their primary duty is to perform non-manual work related to management of the business;
  2. they are to exercise discretion; 
  3. they regularly assist executives or perform specialized work or special assignments; and
  4. they perform less than twenty percent manual work;

B. The Piecework/Flat Rate Exemption

The NMMWA contains an exemption for employees who are paid on a “piecework, flat rate schedules or commission basis.” The “flat rate” exemption is commonly misunderstood to be much broader than it actually is. At first glance, using the colloquial meaning of this phrase, defendants sometime argue that any employee paid a salary, day rate, straight time, or other payment system that is “flat” in the sense that it involves payment for a set period of time, falls within this exemption. But analysis of the caselaw that has developed interpreting this exemption shows that the exemption does not apply this broadly. Instead, “flat rate” as used in the NMMWA is a term of art used to connote payment systems where an employee is is “compensated by the job,” and does not apply to employees who are paid on both a salary and flat-rate basis. Olivo v. Crawford Chevrolet, Inc., 799 F. Supp. 2d 1237, 1242 (D.N.M. 2011). Workers are incentivized to work more efficiently by being paid a set amount for performing a certain task or job, but were instead paid based on the number of days they actually worked. They are not flat-rate schedule employees and are not exempt from the protections of the NMMWA.

The Eleventh Circuit considered an auto body flat rate pay system and found that: “Whether a technician took ten or thirty hours to complete a job, he would still be paid the same…The flat rate of pay was not the hours of time it actually took the worker to complete a job. It is a method of providing employees with an incentive to ‘hustle’ to finish their jobs in order to obtain a larger number of jobs for greater compensation.” Klinedinst v. Swift Invs., Inc., 260 F.3d 1251, 1258-59 (11th Cir. 2001).

Federal Courts in New Mexico have likewise recognized that “flat rate schedule” pay systems involve a flat fee tied to a particular task or job. In Corman v. JWS, truck drivers sued their employer alleging overtime violations under the NMMWA. Corman v. JWS, 356 F.Supp.3d 1148, 1200 (D.N.M. Sept. 5, 2018). One of the headings in the Corman opinion sets forth the Court’s decision regarding the flat rate exception states: “Corman and the other similarity situated Plaintiffs did not work on a ‘flat rate schedule’ basis.” Id. 

The workers were paid twenty five percent of the customer’s transportation charge for each job that they completed. The defendants moved for summary judgment on the basis that the plaintiff truck drivers were paid a “flat rate schedule” and were exempt under the NMMWA. Relying on the authorities cited above, Judge Browning held that the workers did not work on a “flat rate schedule.” Judge Browning found that “flat rate schedule” payment systems “are characterized by standardized estimates for jobs.” Id. 

The Court went on to state: 

“In Yi v. Sterling Collision Ctrs., Inc., 480 F.3d 505; Klinedinst v. Swift Invs., Inc., 260 F.3d 1251; Olivo v. Crawford Chevrolet Inc., 799 F.Supp.2d 1237, employees received compensation proportional to costs to customers calculated based on standardized, estimated hours for jobs. Reading the dictionary definitions and case law together, “flat rates” are fixed or unvarying, because the same rate applies to the same task, regardless other factors. The ratio of the employee’s compensation to the cost charged the customer is not what should not vary; it is the compensation in relation to the amount or quality of work.” 356 F.Supp.3d 1148, 1200 (D.N.M. Sept. 5, 2018).

Also, in Gandy v. RWLS, the Court stated that “the piecework or flat-rate exemption applies to employees who are ‘compensated by the job,’ and does not apply to employees who are paid on both a salary and flat-rate basis.” Gandy v. RWLS, No. 17-558 JCH/CG (D.N.M. March 28, 2019).

The NMMWA does not define piecework or flat rate, but the common definition of piecework is “work done by the piece and paid at a set rate per unit.” Id. Flat rate means “a charge that is the same in all cases, not varying in proportion with something” and exists when an employee is paid per job.” (citing New Oxford American Dictionary (2001); Olivo v. Crawford Chevrolet Inc., 799 F.Supp.2d 1237 (D.N.M. 2011) (Black, J.)(concluding that employees “paid by the job” for painting and repairing cars worked at a “flat rate”)). These cases make it clear that day rates, straight time, salaries, and other payment schemes that are based on a set amount of pay for a fixed unit of time do not qualify as the type of payment systems that fall within the “flat rate” exemption under the NMMWA. 

VIII.  CONCLUSION

The authors of this article hope that this was an enlightening (albeit dense) primer on the differences between the FLSA and the New Mexico overtime statute.  Given the numerous advantages of the NMMWA over the FLSA, practitioners who regularly represent oilfield workers in the Permian Basin are doing themselves and their clients a disfavor if they do not inquire whether their clients worked in New Mexico.  Between the inapplicability of the FWW, the opt-in instead of opt-out procedure for class claims, treble damages, and the tolling and possible extension of the statute of limitations for continuing claims, damages for a NMMWA claim can be between 10-15 times those of an analogous FLSA claim.  In light of this, even small periods of overtime worked in New Mexico can be worth pursuing, as one month spent in New Mexico might be as valuable as an entire year spent working elsewhere.    

About the Authors: Josh Borsellino and Morgan Scott are attorneys licensed in Texas.  They regularly represent employees suing for unpaid overtime.  In addition to being licensed to practice in Texas, Josh is also admitted to practice in the federal district court in New Mexico.  Many of their cases involve those in the oil and gas industry seeking their overtime pay under state and federal statutes.  For a free consultation, call them at 817.908.9861 or 432.242.7118.  

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