7th Circuit’s ‘extra pay’ decision confirms FLSA applies to WI overtime calculations

The U.S. Court of Appeals for the 7th Circuit (whose rulings apply to all employers in Illinois, Indiana, and Wisconsin) held that a Wisconsin health system employer’s practice of including shift differentials, weekend differentials, and incentive (“extra pay”) premiums into employees’ regular rate of pay before applying a half-time overtime multiplier complies with both the federal Fair Labor Standards Act (FLSA) and the Wisconsin Wage Payment and Collection Law (WWPCL). The court also concluded the employer properly excluded holiday pay premiums from the regular-rate calculation because the premiums exceeded 1.5 times employees’ base hourly rates.

Importantly, although Wisconsin law doesn’t define the “regular rate” for overtime purposes, the court found that Wisconsin law must be interpreted to be consistent with the FLSA. 

Background

Nichole Lutz worked as a sterile processing technician for Froedtert Health, a Wisconsin hospital system. Like many healthcare employers staffing around-the-clock operations, Froedtert pays hourly employees a base rate and, where applicable, shift differentials for second- and third-shift work, weekend differentials, and “extra pay” premiums for picking up extra shifts, as well as separate on-call time bonuses. For overtime calculations, Froedtert includes shift differentials, weekend differentials, and extra pay amounts in employees’ regular rate of pay, while excluding on-call pay and holiday pay premiums.