Can CBA Trump FLSA? Stipends vs. Non-Discretionary Bonuses

Today’s FLSA Question: I recently read your article about discretionary bonuses and the regular rate. Our labor contract contains a variety of bonuses, which the contract refers to as “stipends.” These stipends include extra money for medic, fire officer I, and other qualifications. The FLSA requires these stipends included in the regular rate of pay. But the contract also contains the following language:

“All stipends are paid annually and shall not be included in the base rate for overtime purposes.”

What effect does this language have on my FLSA rights? Also, what about the fact that it is referred to as a “stipend” and not as a “bonus” in the contract? Does that matter?

Answer: Excellent and very common question. The language in your collective bargaining agreement (CBA) will not have much of an impact on your individual FLSA rights. Additionally, the fact your contract refers to these non-discretionary bonuses as “stipends” will not effect your individual FLSA rights. Collective bargaining agreements can offer greater or enhanced benefits above what the FLSA requires. However, provisions of a CBA that provide fewer benefits than required by law will be found unenforceable. For example, a labor contract may require hourly wages in excess of both the federal and state minimum wage. However, if a labor contract mandates an hourly wage less than the federal or state minimum wage, that provision of the contract would be unenforceable.

Allowing employees to bargain away their FLSA rights would undermine the purpose and intent of the FLSA. The U.S. Sixth Circuit Court of Appeals summed up this theory very well in its 1995 decision, Featsent v. City of Youngstown. In Featsent, police officers sought to have longevity pay included in the regular rate. Part of the city’s argument in opposition centered around the collective bargaining agreement between the city and police officers—more specifically, the fact that the contract did not require longevity to be included in the overtime rate. The court found this factor unpersuasive. Here is an excerpt:

Finally, we address the City’s argument that the courts should not award plaintiffs what they were unable to achieve through the collective bargaining process. Union representatives may not bargain away employee rights under the FLSA. . . . Furthermore, there is no collective-bargaining exemption from the FLSA. . . . Therefore, we find unpersuasive the City’s argument that because the Agreement was the product of a negotiating process its provisions should be judicially respected. (Emphasis added.)

Finally, the fact that the non-discretionary bonuses in the CBA are referred to as stipends does not affect the regular rate analysis. The regular rate must include all remuneration for employment (with a few narrow exceptions). Remuneration can be in the form of a salary, hourly wage, commission, stipend, bonus, or even an allowance.