Walling v. Harnischfeger Corp.

Background

A Wisconsin electrical-products company and a group of its production employees who are paid on an incentive or piecework plan disputed how overtime should be calculated. The workers had a union-negotiated contract with a guaranteed base hourly rate plus fluctuating incentive bonuses. The Wage and Hour Administrator sued, arguing those bonuses must be included when computing the "regular rate" for overtime under Section 7(a) of the Fair Labor Standards Act.

Reasoning

The Court looked to actual payments rather than contract labels. The majority held that when incentive or piecework bonuses are a regular part of weekly pay they become part of the employee’s regular hourly rate. Employers cannot avoid paying correct overtime by calling the guaranteed base the "regular rate" if workers routinely earn additional incentive pay. The Court reversed the appeals court and affirmed the district court's finding for the Administrator.

Real world impact

Employers using piece rates must include regularly earned bonuses in the overtime calculation and may need to recompute and pay additional overtime until their overtime premium equals one-half of the actual hourly earnings from all regular sources. If correct overtime cannot be computed immediately, employers must make the required adjustments as soon as practicable.

Dissents or concurrances

A concurring opinion noted piece rates are lawful and urged clear contractual apportionment if parties intend a different overtime math. The dissent argued that bona fide collective agreements already paying above statutory minimums should be respected and need not be reallocated by courts.