By Christopher Morehead
For the Oregon Beer Growler
As you may recall from prior Oregon Beer Growler issues, the status of Oregon’s overtime rule for mills, factories and manufacturing establishments (which includes breweries) has been in constant flux since December 2016. That is when the Oregon Bureau of Labor and Industries (BOLI) unexpectedly decided to reinterpret longstanding overtime laws by requiring that manufacturing employers “pyramid” (i.e., pay both) daily and weekly overtime hours. Unsurprisingly, employers were extremely concerned with potential exposure to wage claims (including class actions) and, further, whether they’d have to completely overhaul their scheduling and pay practices.
However, after legal battles and legislative action, Gov. Kate Brown signed into law House Bill 3458 on Aug. 9, 2017, which explicitly rejects BOLI’s 2016 interpretation and brings much-needed clarity and certainty to Oregon breweries. The new law will permit breweries to pay nonexempt employees the greater of daily or weekly overtime. As a compromise with labor interests and lobbies, the law will also impose new maximum limits on hours in the workweek for manufacturing employees.
When Will the Law Take Effect?
The provision of the law affecting how manufacturing employers calculate daily and weekly overtime takes effect upon the law’s passage. The provisions that impose new maximum limits on hours in a workweek take effect Jan. 1, 2018.
Which Employees Are Covered by the Law?
As mentioned, the law applies to individuals employed in breweries. However, the law does not apply to employees “whose principal duties [are] administrative in nature or who are not otherwise engaged in the direct processing of goods in the usual course of the employee[s’] duties.”
There are also numerous exemptions. The law does not apply to supervisors, managers, foremen or forewomen, or other employees whose “primary duty” (i.e., who spend more than 50 percent of their time) supervising and directing work. In addition, employees are not considered “employed in” a manufacturing establishment if they perform duties that do not include work in connection with production machinery and are in a location that is physically separated from the actual production process by means of an architectural barrier. For example, a marketing employee working in a back office, which is physically separated from the production floor, probably would not count.
Does the Law Apply to Employees Subject to a Collective Bargaining Agreement?
No, provided that a collective bargaining agreement (1) is in effect at the employee’s worksite; (2) contains a provision that limits the employee’s required hours of work; and (3) contains a provision for the payment of overtime hours of work.
How Does the Law Change the Way in Which Overtime Pay Is Calculated?
As noted above, in December of 2016, BOLI changed its guidance to employers on the payment of daily and weekly overtime hours. Under BOLI’s revised guidance, the requirement to pay overtime wages for working more than 10 hours in a day under Oregon Revised Statutes (ORS) 652.020 and the requirement to pay overtime wages for working more than 40 hours a week under ORS 653.261 operated independently of each other, without an offset. As a result, BOLI directed employers to “pyramid” the overtime hours — i.e., calculate the amount of overtime earned by the employee under each statute and pay both overtime amounts to the employee.
The new law restores the overtime calculation method that BOLI had historically advised for employers: When employees who are entitled to daily overtime have worked more than 40 hours in a workweek and have also exceeded the maximum number of hours on one or more days in the workweek, thereby earning daily overtime, the employer should calculate overtime hours worked on both the daily and weekly bases and pay the greater amount.
The law further clarifies that a “workweek” means a “fixed period of time established by the employer that reflects a regularly recurring period of 168 hours or seven consecutive 24-hour periods.”
What Are the New Limitations on Maximum Hours in a Workweek?
Under the new law, ORS 652.020 is modified to impose the following additional limitations on hours in a workweek:
— Covered employees may not work more than 55 hours in any one workweek; however, an employee may “work up to 60 hours in one workweek if the employee requests or consents in writing to enforwork more than 55 hours in the workweek.”
— Breweries are likely eligible for an “undue hardship period exemption” because they process perishable products in the ordinary course of their business. The “undue hardship period exemption” allows the employer to permit employees to work up to 84 hours per workweek for four workweeks and up to 80 hours per workweek for the remainder of the undue hardship period. To claim the exemption, employers must provide notice to BOLI and obtain written consent from each affected employee.
What Are the New Enforcement Provisions?
The law makes it unlawful for employers to discharge, refuse to hire, discriminate or retaliate against employees or prospective employees who inquire about their rights to overtime compensation under the law, report violations, file complaints or decline to consent to work more than 55 hours in a workweek. Employees may file complaints with BOLI to enforce their rights or file fee-bearing private civil actions. In addition to recovering damages, BOLI has authority to assess civil penalties of up to $3,000 per violation.
By Chris Morehead
For the Oregon Beer Growler
Remember the March edition when I wrote about the Oregon Bureau of Labor and Industries’ (BOLI) bold new interpretation of overtime compensation rules that would have reversed years of past practice and potentially impacted craft brewers across the state? Well, brewers can now take a big sigh of relief. On March 9, 2017, an Oregon court shot down the new BOLI interpretation, which should be viewed as a major victory for all “manufacturing establishments” — breweries included— in Oregon.
As a brief refresher, in December 2016, BOLI did a complete 180 with respect to its interpretation of how daily and weekly overtime should be calculated for employees who work in mills, factories and manufacturing establishments. Under the new BOLI rule, manufacturing establishments (which includes breweries) were required to pay employees overtime rates for hours worked in excess of 40 hours per week as well as overtime rates for any hours in excess of 10 hours in any given day.
Significantly, this rule would have allowed employees to potentially count the same hour of work toward both their daily and weekly overtime totals (“double-counting”). This was a drastic change from the old rule, which only required manufacturers to pay the greater of daily or weekly overtime hours worked by employees in a workweek (but not both). BOLI’s new interpretation took center stage in a class-action lawsuit filed against Portland Specialty Baking in 2016.
In great news for employers, the Multnomah County Circuit Court rejected BOLI’s new rule. According to Judge Kathleen Dailey, a manufacturing employer subject to both ORS 653.261 and ORS 652.020 (which includes breweries) must calculate both daily and weekly overtime in a workweek and pay only the greater of the two amounts. The court reasoned that this interpretation creates a consistent reading of the two overtime statutes, prevents “double-counting” of overtime hours and ensures all work performed in excess of 40 hours per week is paid at the rate of no less than one-and-one-half times the regular rate of pay. Accordingly, Judge Dailey dismissed the plaintiffs’ claims for daily and weekly overtime wages for work performed in the same week.
While the court’s ruling is a big win for all Oregon manufacturing employers, this is not, unfortunately, the end of the matter. It is expected the plaintiffs will seek review of the decision. However, before any such review might occur, the Oregon legislature could pass Senate Bill 984, which is intended to eliminate any ambiguity as to the calculation of daily and weekly overtime under ORS 652.020 and ORS 653.261 in a manner consistent with the court’s ruling. Interested employers may want to contact their state legislators and express support for Senate Bill 984.
In the interim, the new court opinion is an important consideration in determining compliance obligations. While unlikely, it is conceivable that Senate Bill 984 will not pass and the Court of Appeals will reverse Judge Dailey’s opinion. In that scenario, brewers could be liable for overtime wages as far back as two years, plus attorneys’ fees and costs. Accordingly, brewery owners concerned about their current wage payment structure and/or shift scheduling practices are encouraged to seek legal counsel in addressing potential risk and exposure.
Chris Morehead is an attorney in the Portland office of Ogletree Deakins, a national labor and employment law firm. He focuses on hospitality employers, with an emphasis on the craft beer industry. He can be reached at email@example.com or 503-552-2140.
By Chris Morehead
For the Oregon Beer Growler
Oregon’s Bureau of Labor and Industries (BOLI) recently announced a new interpretation of overtime compensation rules that directly impacts Oregon breweries and brewpubs. Under the new guidance issued in December 2016, employees in “manufacturing establishments” must be paid overtime rates for hours worked in excess of 40 hours per week and overtime rates for any hours in excess of 10 hours in any given day. BOLI says that manufacturing establishments cannot continue with the former practice of paying employees the greater of the daily overtime rate or the weekly overtime rate.
It’s important to note that this new interpretation is not the result of a new law being passed. Oregon Revised Statutes (ORS) 652.020 has always stated that employees who work in manufacturing establishments must be paid one and one-half times their regular hourly rate when the employees work more than 10 hours in a work day. Similarly, ORS 653.261 has always stated that employees who work more than 40 hours in a week are entitled to pay one and one-half times their regular hourly rate.
However, as noted above, BOLI previously interpreted these two statutes to allow covered employers to simply pay employees the higher of the weekly and daily overtime amounts. For example, under the prior interpretation, if an employee worked 11 hours on Monday and Tuesday, and 10 hours on Wednesday, Thursday and Friday — for a total of 52 hours in the week — the employee would only be entitled to 12 hours of overtime pay (because the 12 hours over 40 is greater than the two daily hours of overtime for Monday and Tuesday). Under the new interpretation, however, the same employee is entitled to 14 hours of overtime pay (the two daily overtime hours for Monday and Tuesday, plus the 12 hours over 40 in the week) and 38 hours of regular pay.
The timing of BOLI’s position change is also interesting. It follows a class action lawsuit that was filed last year against Portland Specialty Baking. The suit argues that the bakery was not paying workers daily and weekly overtime. Brad Avakian, the BOLI commissioner, submitted a declaration in support of the plaintiff workers. And now we have the new interpretation.
Why does this apply to breweries and brewpubs?
Breweries and brewpubs are covered because a “manufacturing establishment” is defined as any place where machinery is used for “manufacturing purposes.” This includes any establishment making goods by machinery, any making of raw materials by machinery, and any producing articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, by use of machinery.
Beer, of course, is brewed from raw materials and involves the use of machinery. My conversations with BOLI have similarly confirmed that the agency interprets the statute to cover breweries and brewpubs.
Are there any exceptions?
Yes. The new interpretation does not impact the statutory exceptions, which state that the daily overtime pay requirements do not apply to, among others: supervisors, managers, foremen/women and those temporarily acting in such capacities in the absence of supervisory employees; those whose primary duty is that of making necessary repairs; and boiler operators.
The daily overtime law also does not apply to employees who are employed to perform duties that do not include work in connection with production machinery, such as administrative staff or bookkeepers, provided they don’t work in the brewery or brewpub, or they perform their duties in a location that is physically separated from the actual production process by means of an architectural barrier.
This “double pay” issue is currently being looked at by the legislature, which will hopefully amend the existing statutes to clarify its intent as to whether employees are or are not entitled to daily and weekly overtime pay when the employee works more than 40 hours in a week.
It is also unclear whether BOLI will take the position that covered employers are expected to retroactively correct payments made to employees during the last two years (the length of the applicable statute of limitations for overtime wage claims). But as the Portland Specialty Baking case made clear, some plaintiffs’ attorneys are not necessarily going to wait to find out what the courts or legislature decide.
At the very least, breweries and brewpubs should immediately ensure they are not currently running afoul of BOLI’s new overtime interpretations. Breweries and brewpubs are also encouraged to seek legal counsel to help evaluate their potential exposure to overtime wage claims, and how to best handle their specific wage payment structure and shift scheduling practices.
Chris Morehead is an attorney in the Portland office of Fisher Phillips, a national labor and employment law firm. He focuses on hospitality employers, with an emphasis on the craft beer industry. When not in the office, he’s collecting badges on “Untappd.” He can be reached at CMorehead@fisherphillips.com or 503-205-8099.