My 1st post on this topic is here. But there’s so many hits on my website concerning pyramiding of overtime (OT) that I figured it’s time for an SEO boost & revisit this subject.
Simply put (hopefully), pyramiding of OT occurs when an employee receives OT for both working more than 8 hours in a day & working more than 40 hours in a week. It results in the payment of OT through OT or premium pay for the same hours worked regarding work performed in excess of 8 hours in any 1-day or in excess of 40 hours in any work week. This typically affects few OT hours in a week, & there’s a narrow & often confusing circumstances that lead to pyramiding. However, if this occurs with more than one employee the monetary loss can be significant. Moreover, it could set a bad precedent. Also keep in mind that some states mandate double pay or “premium” pay for certain overtime situations (e.g., CA & NY). In those states determining OT or premium pay can be more complicated.
Pyramiding can happen if an employee works scheduled extended hours on a daily basis. For example, say an employee works a scheduled 4 AM until 4 PM four days a week. The employee may try to claim OT after the 40th hour that week, & after the 8th hour worked each day, unless there’s some prior arrangement. The prior arrangement could be to pay the employee OT from 4 AM – 6 PM & from 2:30 PM – 4 PM each day, 14 hours of OT per week. In this example, pyramiding results if the employee gets 18 hours of OT that week (14 + 4 hours) instead of 14.
It can also occur when that same employee claims OT if a holiday falls say on a Friday, but the employee works Monday through Thursday. In that instance, the employee may claim OT for all of Friday (8 hours) instead of either straight time or their regularly scheduled OT of 3.5 hours that day.
Premium or bonus rates that apply to OT worked can also result in pyramiding. An employee may try to claim a premium or adjusted rate based on using both rates for all hours over 40 in the week. A policy against pyramiding is sufficient to prevent this. Most companies will just use the highest hourly rate of pay for those hours, or have some sort of stipulation, e.g. that any hours worked on Sundays or holidays are separate from the normal workweek.
There aren’t a lot of court cases out there on this topic, maybe two-dozen published & unpublished decisions. Like I said, there’s narrow circumstances that lead to pyramiding. There are at least hundreds of arbitration decisions though. Most of the decisions uphold company policies or agreements stipulating to one rate of pay for OT.
One very well written arbitration decision, that’s conveniently from November 2015, decided the question of whether union employees were properly compensated for workweeks that included Thanksgiving 2014, Christmas 2014, New Year’s 2015, Memorial Day 2015, Independence Day 2015, and Labor Day 2015. Note that this is a class action, so we’re talking about what could be big money (unfortunately there’s no mention of how many employee would be affected). The collective bargaining agreement (CBA) stated that for all hours worked beyond 40 hours in a workweek an employee receives the legally mandated time & one-half their regular rate for that workweek. The CBA explicitly stated that there’s no pyramiding of OT, & defined pyramiding as the utilization of multiple overtime rates. Names & AAA case # redacted; 2015 WL 10489688 (AAA).
The employer won. But in really instructive language the arbitrator summarizes the law on pyramiding of OT:
The Union’s case flies in the face of the great weight of arbitral authority interpreting no-pyramiding clauses. The Company’s brief contains references to six cases which were resolved in large part by concluding that no-pyramiding clauses are to be honored and adhered to. A few are cited herein. “[T]he majority of arbitral thought takes a dim view on pyramiding, particularly when a Collective Bargaining Agreement strictly prohibits same.” Folgers Coffee Co. and Auto Workers, Local 1805, 124 LA 1623, 1627 (2008)(company did not violate contract when it paid employees who worked 48-hour week straight time for all non-holiday hours and double-time holiday pay for working Thanksgiving, where contract prohibited pyramiding of pay). See also Bunge North America, Inc. and Steelworkers Local 13-447, 132 LA 1379 (2013)(company did not violate contract when it paid employee double time for four holidays, in accordance with the holiday pay provision, and did not pay time-and-one-half for work over forty hours in those weeks because to do otherwise would violate no-pyramiding clause of contract); “The prohibition on pyramiding prevents an employee from receiving a windfall when two or more different premium pay rates would otherwise apply to the same hour.” Cambridge Medical Center v. Int’l Union of Operating Engineers, Local #70, FMCS Case [REDACTED] (July 24, 2006)(“The fact that the no pyramiding clause appears in the contract is evidence of the parties’ intent to disallow the practice of counting hours twice for multiple premiums.”).
In one published & typical court decision, Hallam v. Holland America Line, Inc., 180 P.3d 955 (2008), Alaska Supreme Court, the court dismissed the employee’s claim to pyramided OT by noting that the employee could not point to any jurisdiction adopting a pyramiding theory. Moreover, Alaska prohibits pyramiding via statute, AS 23.10.060(b): “the number of hours worked shall be determined without including hours that are worked in excess of eight hours in a day because the employee has or will be separately awarded overtime compensation based on those hours.” For those of you who are litigation aficionados, the employee’s lawsuit was originally dismissed via summary judgment.