Poe v. IESI MD Corporation

Leonard Poe v. IESI MD Corporation, No. 559, Sept. Term 2018. Opinion by Arthur, J. MARYLAND WAGE AND HOUR LAW—OVERTIME FOR “DAY-RATE” EMPLOYEES Under the Maryland Wage and Hour Law and its implementing regulations, eligible employees are entitled to an overtime wage of at least 1.5 times the “usual hourly wage” or “regular hourly rate” for each hour that the employees work in excess of 40 hours during one workweek. The “regular hourly rate” is determined by dividing the total compensation for employment in any workweek by the total number of hours worked in that workweek. Maryland has no statute or regulation expressly stating how to calculate overtime pay when an employee receives compensation at a “day rate” (i.e., a fixed amount of money per day worked, without regard to the number of hours worked).

A day-rate employee is entitled to extra half-time pay (i.e., an extra 50% of the regular hourly rate) for each hour worked in excess of 40 in one workweek. The employee has already received 100% of the regular hourly rate for all hours worked; the fixed day rate wages compensates the employee for all hours worked, including the overtime hours. This result is identical to the overtime calculation for day-rate employees under the federal Fair Labor Standards Act. Circuit Court for Prince George’s County Case No. CAL16-42381 REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 559 September Term, 2018 ______________________________________ LEONARD POE v. IESI MD CORPORATION ______________________________________ Arthur, Reed, Zarnoch, Robert A.

(Senior Judge, Specially Assigned), JJ.* ______________________________________ Opinion by Arthur, J. ______________________________________ Filed: November 20, 2019 *Judge Steven B. Gould did not participate in the Court’s decision to designate this opinion Pursuant to Maryland Uniform Electronic Legal Materials Act for publication pursuant to Md. Rule 8-605.1. (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2019-11-20 15:02-05:00 Suzanne C. Johnson, Clerk Under Md. Code (1991, 2016 Repl. Vol., Supp. 2019), § 3-415 of the Labor and Employment Article (“LE”), “each employer shall pay an overtime wage of at least 1.5 times the usual hourly wage.” This case presents the question of how the overtime wage is computed when an employee is not paid by the hour. Appellant Leonard Poe was employed by appellee IESI MD Corp., a trash-hauling business.

IESI paid Poe a “day rate” – i.e., it paid him a specified amount of money per day rather than per hour of work. Day-rate compensation is common in the trash-hauling industry, because it motivates employees to work quickly and efficiently: the sooner the employees finish the job, the greater their rate of pay. When Poe worked more than 40 hours in a week, he was entitled to overtime compensation under the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 , and the Maryland Wage and Hour Law, LE §§ 3-401 to -431. IESI computed Poe’s overtime compensation by employing 29 C.F.R. § 778.112 , a longstanding federal regulation that dictates the method for computing overtime compensation for day-rate employees under federal law.

Poe disputed IESI’s calculations. He filed suit, claiming that the federal regulation was inconsistent with the Maryland Wage and Hour Law and that, in relying on the federal regulation, IESI had understated the amount of overtime compensation that he was due under State law. The Circuit Court for Prince George’s County granted IESI’s motion for summary judgment. The circuit court placed its decision on two grounds.

First, the court reasoned that the federal regulation is consistent with Maryland law. Second, the court reasoned that, under the so-called Motor Carrier Act exemption in LE § 3-415(b)(1), the Maryland Wage and Hour Law did not apply to IESI. Poe appealed. He presents the following questions: 1.

Did the trial court err by granting summary judgment against Mr. Poe based upon a federal Department of Labor regulation permitting the payment of a “half-time” overtime rate, where Mr. Poe brings no claim under federal law, and where Maryland law mandates that non-exempt employees like Mr. Poe shall receive 1.5 times their regular rate of pay for overtime hours? 2. Did the trial court err by granting summary judgment against Mr. Poe based upon the application of the Motor Carrier Act exemption to the Maryland Wage and Hour Law, where Mr. Poe did not engage in any interstate commerce during the relevant time period, or where any interstate activity was de minimis? We shall affirm the judgment on the ground that IESI’s computation of Poe’s overtime compensation did not violate the Maryland Wage and Hour Law. We do not reach the separate question of whether IESI is immune from the Maryland Wage and Hour Law under the Motor Carrier Act exemption.

STANDARD OF REVIEW When a party moves for summary judgment, the court “shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” Md. Rule 2-501(f). In this case, the parties appear to agree that there is no genuine dispute as to any material fact. Consequently, the only issue before us is whether the circuit court correctly concluded that IESI was entitled to judgment as a matter of law. “[T]his Court conducts a de novo 2 review to determine whether the circuit court’s conclusions were legally correct.” Trim v. YMCA of Cent. Maryland, 233 Md. App. 326, 332 (2017).

THE PERTINENT STATUTES AND REGULATIONS In 1938 Congress passed the Fair Labor Standards Act. Among its many achievements, the Act created a federal right to overtime compensation for certain employees who were engaged in interstate commerce. At present, that right is expressed in 29 U.S.C. § 207 (a)(2)(C), which generally prohibits an employer from employing an employee for a workweek longer than 40 hours “unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” “The statute contains no definition of regular rate of pay and no rule for its determination.” Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 460 (1948). LE § 3-415(a) states the general rule for overtime compensation under Maryland law: “Except as otherwise provided in this section, each employer shall pay an overtime wage of at least 1.5 times the usual hourly wage, computed in accordance with § 3-420 of this subtitle.” LE § 3-420(a) instructs us that, “[e]xcept as otherwise provided in this section, an employer shall compute the wage for overtime under § 3-415 of this subtitle on the basis of each hour over 40 hours that an employee works during 1 workweek.” Read together, the two Maryland statutes generally require employers to pay an overtime wage equal to “at least 1.5 times the usual hourly wage” for “each hour over 40 hours that an employee works” in a workweek.

Like the federal statute, the Maryland statutes contain no definition of “usual hourly wage” and no rule for its determination. 3 The Maryland Department of Labor has adopted two regulations that bear on the calculation of overtime compensation under Maryland law. First, COMAR 09.12.41.19.A defines the “[r]egular hourly rate” to mean “the usual hourly rate,” a term similar to “the usual hourly wage” in LE § 3-415(a). COMAR 09.12.41.19.B goes on to state that “[t]he regular hourly rate is determined by dividing the total compensation for employment in any workweek by the total number of hours worked in that workweek.” Second, COMAR 09.12.41.14.B echoes the Maryland statutes by stating, in pertinent part, that “[c]ompensation for hours worked in excess of 40 hours per workweek is computed at 1-1/2 times the regular hourly rate at which the employee is employed.” The State and federal statutes are easy to apply to a conventional employment agreement, in which an employee is paid a fixed hourly rate. Employment contracts, however, “take many forms.” Bay Ridge Operating Co. v. Aaron, 334 U.S. at 460 .

The rate of pay may be by the hour, by piecework, by the week, month or year, and with or without a guarantee that earnings for a period of time shall be at least a stated sum. The regular rate may vary from week to week. The employee’s hours may be regular or irregular. From all such wages the regular hourly rate must be extracted.

Id. at 460-61 (citations omitted). More than 50 years ago, in 1968, the United States Department of Labor adopted a regulation interpreting how an employer must calculate overtime compensation, under the Fair Labor Standards Act, for employees who are paid a fixed sum of money for a day’s work, regardless of how many hours it takes them to do that work. That regulation, 29 C.F.R. § 778.112 , states: 4 If the employee is paid a flat sum for a day’s work or for doing a particular job, without regard to the number of hours worked in the day or at the job, and if he receives no other form of compensation for services, his regular rate is determined by totaling all the sums received at such day rates or job rates in the workweek and dividing by the total hours actually worked. He is then entitled to extra half-time pay at this rate for all hours worked in excess of 40 in the workweek.

The following example illustrates how 29 C.F.R. § 778.112 operates in practice. First, assume that an employee is paid a day rate of $200 per day, or $1000 over the course of a five-day week. Assume, further, that the employee works five days and logs 50 hours in a given week. Under the federal regulation, the employer would compute the “regular rate” by dividing $1000 (“all the sums received at such day rates or job rates in the workweek”) by 50 (“the total hours actually worked”), which equals $20 per hour.

The employee would then be entitled to an additional $10 per hour (“extra half-time pay” of half the “regular rate” of $20), or $100 in total, for the 10 hours that he or she worked “in excess of 40.” In total, therefore, the employee would be entitled to $1100, or $100 over and above what he or she would receive through the day rate alone. It may not be immediately apparent how 29 C.F.R. § 778.112 can satisfy the federal statutory requirement of overtime compensation of “not less than one and one- half times the regular rate at which [the employee] is employed” ( 29 U.S.C. § 207 (a)(2)(C)) when the regulation requires only “extra half-time pay at [the regular] rate for all hours worked in excess of 40 in the workweek.” If the employee’s “regular rate” is $20 per hour and if the employee worked 10 hours of overtime, why isn’t the employer liable for $300 in overtime compensation ($20 x 1.5 x 10) on top of the $1000 in day-rate pay? 5 The answer is that, when employees have been paid a day rate, they have already been compensated at their full “regular rate” for the hours that they have worked in excess of 40: “The fixed salary compensates the employee for all his hours, the overtime ones included. He therefore receives 100% of his regular rate for each hour that he worked.” Dufrene v. Browning-Ferris, Inc., 994 F. Supp. 748, 753 (E.D. La. 1998) (quoting Condo v. Sysco Corp., 1 F.3d 599, 605 (7th Cir. 1993)), aff’d, 207 F.3d 264 (5th Cir. 2000). For that reason, the employee “‘is entitled only to an additional fifty percent of [the] regular rate for the hours that he [or she] worked in excess of forty.’” Id.

(quoting Condo v. Sysco Corp., 1 F.3d at 605 ). Under our example, the employee receives 1.5 times the “regular rate” of $20 per hour when he or she works 50 hours, is paid day-rate compensation of $1000 (or $200 a day), and gets an additional $100 ($20 x .5 x 10) in overtime compensation. In economic terms, the employee receives $20 per hour (or $800) for the first 40 hours and $30 per hour (or $300) for the 10 hours in excess of 40, for a total of $1100. Under the method prescribed by the United States Department of Labor, “the greater number of hours an employee works, the lower his regular rate will be and the less he will receive per overtime hour.” Condo v. Sysco Corp., 1 F.3d at 605 .

But this is in the nature of any arrangement in which the rate of compensation rises or falls as a function of the amount of time that it takes to do the job. See Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 580 (1942) (recognizing that, when an employee is paid a 6 weekly wage but works variable or fluctuating hours, “the longer the hours the less the rate and the pay per hour”). Maryland has not adopted a statute or regulation that, like 29 C.F.R. § 778.112 , expressly instructs employers how to compute overtime compensation for day-rate employees.

This case requires us to examine the implications of the absence of any such statute or regulation. Does it mean that Maryland law forbids employers from using the federal regulation in computing overtime compensation for employees who are paid a day rate and that employers must use some other formula, more advantageous to employees? Or is the federal regulation persuasive authority as to how employers must compute overtime compensation under the related provisions of Maryland law? ANALYSIS Maryland appellate courts have said that the Maryland Wage and Hour Law is the “State parallel” to the Fair Labor Standards Act (Newell v. Runnels, 407 Md. 578, 649 (2009); Friolo v. Frankel, 373 Md. 501, 513 (2003)) and “the state’s equivalent” (Campusano v. Lusitano Constr.

LLC, 208 Md. App. 29, 37 (2012)) of the federal statute. See also Friolo v. Frankel, 438 Md. 304, 307 (2014) (describing the Maryland Wage and Hour law as “the Maryland counterpart to the Federal Fair Labor Standards Act”); Friolo v. Frankel, 373 Md. at 515 (observing that “[t]he Wage and Hour Law shares the benevolent