Trial Court Rejects “Short Shift Bonus” As Overtime Avoidance Scheme

Los Angeles Superior Court Judge William MacLaughlin has ruled that Huntington Memorial Hospital violated California Labor Code § 510 by paying its nurses and other employees a lower, hourly, rate-of-pay when they worked overtime shifts of 10 hours or more in a day. Huntington Memorial Hospital set up a pay scheme under which received a “short shift bonus” of 16.66667% whenever they worked less than 10 hours per day. Virtually all nurses worked either 8-hour shifts or 12-hour shifts. The mechanics of the practice were such that employees working 8 hours, with their "short shift bonus" earned the same hourly rate as they did when they worked a 12 hour shift without the
short shift bonus." The hospital, represented by Littler Mendelson, argued that the “short shift bonus” plan was really designed to confer an "extra benefit" upon employees when they were not afforded the wonderful opportunity to work a 12-hour shift with overtime pay. Attorneys for the class argued that the true purpose and effect of the plan was to reduce employees' pay on long shifts so as to negate the overtime rate required under California law.

The case was certified in 2004, and the issue was tried in the first part of a bifurcated trial that wrapped up in July. Judge MacLaughlin's memorandum of decision can be read in the attachment found here. The findings and determinations were as follows:

• (1) Defendant's pay system during the class period is an artifice or subterfuge which evaded and failed to comply with the overtime laws;
• (2) the regular rate of pay for 12-hour employees does not need to be computed in a "wholly unrealistic and artificial mannet' in the circumstances of this case to prove a violation of the wage laws; in this instance, Defendant's failure to include the SSP in the calculation of the regular rate violated the law and its purposes;
• (3) the amounts paid to the Class after the 8th and 12th hour of the work day, or 80 hours in a pay period, did constitute payment for overtime (although not based on the correct regular rate) and do not have to be included in the calculation of the regular rate;
• (4) the short shift premium was remuneration based on the hours worked and any other reason for its payment does not exclude it from calculation of the regular rate; and
• (5) the evidence produced by Plaintiffs established that the short shift premium must be included in the calculation of the regular rate of pay for 12 hour employees who worked 10 or more hours in a scheduled 12-hour shift during the class period.

On the legal issues, the Court found that the evidence produced establishes by a preponderance of the evidence that Defendant's pay system during the class period violated California Labor Code Section 510 and that such violation warrants restitution to members of the Class of the amounts representing the difference between what was actually paid and the amount that should have been paid as overtime to 12-hour employees who worked 10 or more hours in a shift.

The decision is not binding on any other court, and cannot be cited, but it is an interesting read nonetheless. Short shift bonuses are not common, but not unheard of in California, either. Absent a settlement, this case could result in a published opinion sometime in 2008 or 2009.

Comments

[Steve Kane]

This ruling substantially incorporates and effectuates the 2005 opinion of the 2nd District Court of Appeal in a prior writ proceeding in the same case, Huntington Memorial Hosp. v. Superior Court (2005) 131 Cal.App.4th 893. Although the case does involve the "short shift differential," the principle it invokes that wage and hour requirements cannot be circumvented by "artifice and subterfuge" is most likely applicable to other wage and hour situations.