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Maryland Appellate Court Adopts Federal Overtime Standard

Maryland’s Wage and Hour Law is closely modeled on the federal Fair Labor Standards Act. Similar to the FLSA, Section 3-415 of the Maryland Labor and Employment Article requires that employers pay overtime at rate of “1.5 times the usual hourly wage.”  A recent decision from the Maryland Court of Special Appeals held that, when an employee is paid a “day rate” (i.e., a fixed amount of money per day worked, without regard to the number of hours worked), Maryland employers should follow the federal standard and pay the employee extra half-time pay for all hours worked in excess of 40 in a workweek.   Poe v. IESI Corp. No. 559 (November 20, 2019).

Leonard Poe worked as a trash hauler and, as is common in the industry,  was paid a day rate to incentivize him to complete his work quickly.  When he worked over 40 hours in a week, he was paid half-time for his overtime hours.  The half-time method is computed by totaling an employee’s total compensation for the week and dividing it by all hours worked to calculate a “regular rate.”  The employee is then paid 1/2 of the regular rate for overtime hours.  This method of calculating overtime for day rate employees is expressly approved by the federal regulations interpreting the FLSA.  29 CFR §778.112.

Poe argued that he should be paid  an additional 1.5 times his regular rate for his overtime hours because Maryland has no statute or regulation expressly stating how to calculate overtime for day rate employees.  The Circuit Court for Prince Georges County rejected his argument and granted IESI’s motion for summary judgment.  Poe then appealed.

The Court of Special Appeals agreed with the trial court, concluding that the federal regulation on how to calculate overtime for day rate workers is “persuasive authority as to the interpretation of Maryland law.”  The Court noted that the federal regulation had been in effect for over 50 years, and “has undoubtedly been relied upon by numerous employers in Maryland during that time.” The Court further explained that the half-time method of overtime compensation satisfies the requirements of Maryland law because the day rate pays the employee 100% of his regular rate for all of his hours  (including overtime hours), while the additional half-time premium for overtime  meets the obligation to pay 1.5 times the regular rate for hours in excess of 40.

The Poe decision if valuable because it confirms that Maryland employers may turn to the FLSA for guidance on the application of Maryland Wage and Hour Law.  In the absence of contrary Maryland authority, Maryland employers should feel free to use federal regulations, cases, and Administrator Opinions to ascertain their wage and hour obligations.

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