Case Study 7-1 Premium Pay Rates

For at least 21 years, the company has paid double the straight-time pay rate for work after 50 hours in any given workweek to all plant employees, whether they worked a five-day, eight-hour schedule (“5/8 employees”) or a four-day, ten-hour schedule (“4/10 employees”).

The collective bargaining agreement (CBA) provided for such payment after 50 hours to the 4/10 employees but not the 5/8 employees. The employer, in December 2000, put the union and all hourly personnel on notice that effective January 1, 2001, overtime would be paid in accordance with the CBA; that is, the practice of paying double time after 50 hours to 5/8 employees would cease. The union objected and brought this grievance.

The union argued that the practice of paying 5/8 employees double time for hours worked over 50 hours in one workweek has been in effect for over 20 years. The current CBA has a provision that protects employees from any deduction in pay. It says, “No employee shall suffer a deduction in wage rates or working conditions as a result of this agreement.” Allowing the company to change its overtime pay policies while this CBA is in effect violates that term.

Furthermore, there have been some five CBAs negotiated since that practice has been in effect, and the company has never sought to negotiate or clarify the practice of how it pays overtime or the CBA provision regarding no reduction. Finally, the union pointed out that the length of time the practice was in place would certainly qualify it as a “past practice” that the company could not change unilaterally.

The company contended that the payment of overtime at double the straight-time rate for 5/8 employees is in direct conflict with the language of the CBA. An employer may abandon past practice that is in direct conflict with the clear language of the CBA. Also, the general CBA provision regarding “no reduction in pay” cannot be interpreted as controlling the specific overtime provision of the CBA.

QUESTIONS

1. What do you think would be the “fair” way to resolve this case? Should the company be required to pay 5/8 employees double time even though that benefit has never been negotiated, and so, arguably, the company has never received any exchange for this benefit? Or should those employees who have in good faith accepted overtime work believing they would be paid double time, even though their contract did not say they would, have to give up this benefit and get nothing in return?