Today’s FLSA Question: I recently read that a small village outside of Chicago decided to privatize its fire service in an effort to reduce costs. In particular village leaders claimed the overtime obligations for village firefighters was too high and by privatizing fire services the village would save significant money while maintaining the same daily staffing. I would think private firefighters would be subject to the same FLSA requirements as the village firefighters, no? Can a city or town reduce overtime costs simply by privatizing fire services?
Answer: That is a good question with an answer that might surprise you. Private fire departments—private for-profit companies contracted to provide fire or EMS services to a community—do not qualify for any of the special rules Congress and the Department of Labor (DOL) created specifically with the intent of helping cities and towns avoid paying overtime to public employees. As a general rule, the only way for a city or town to reduce overtime costs through privatization is by either reducing on-duty staffing levels or drastically reducing firefighters’ wages.
Let’s look at three critical distinctions in how the FLSA and DOL regulations treat public agency fire departments different from their private counterparts.
The Public Option & the FLSA
The FLSA allows public agency fire departments to utilize the §207(k) partial overtime exemption for its firefighters. The §207(k) overtime exemption allows public agency fire departments significant overtime relief in two ways: First, it increases the number of hours a firefighter must work before being eligible for FLSA overtime; and second, it increases the FLSA’s standard 7-day workweek, to work periods that can be as long as 28 days.
For example, a public agency fire department that has adopted a 28-day work period is only required to pay FLSA overtime to firefighters for hours worked over 212 in that 28 days. In comparison, traditional FLSA rules require an employer pay overtime to an employee for all hours worked over 40 every 7 days. In theory, the §207(k) firefighter can work 80, 90, or even 100 hours in the first week of the work period and receive zero overtime by simply taking a day-or-two off a full three weeks later. This is a huge advantage to both the fire department and the taxpayer.
Next, public agency fire departments can opt to provide compensatory time in lieu of providing FLSA overtime pay for firefighters. In theory, properly staffed public agency fire departments can avoid paying firefighters any overtime by simply providing paid time off to the firefighter at some point in the future. Click here for more information on comp time.
Finally, public agency firefighters can substitute freely for each other’s assigned work shifts with zero FLSA overtime implications. This provides a benefit to both the firefighter and the fire department. Click here for more information on firefighter substitutions.
The Private Option
As a general rule the FLSA requires private fire departments pay firefighters overtime for all hours worked over 40 in a 7-day workweek. Private fire departments cannot claim the §207(k) overtime exemption or utilize FLSA comp time as methods of controlling the costs of firefighter overtime. Additionally, private firefighters cannot substitute for each other, like their public-agency counterparts.
Think of the financial implications of paying a firefighter working 24-hour shifts overtime after working only 40 hours every 7 days. Especially in light of the public-agency only FLSA rules discussed above.
Additionally, private fire departments will likely face increases in other non-overtime related expenses. Costs associated with workers’ compensation and liability insurance can be crippling for private fire departments, especially when compared to cheaper public sector alternatives.
Moving forward, it will be interesting to monitor the annual costs for fire protection for this village outside of Chicago. Historically speaking, privatization can provide short term savings. However, most of that savings is attributable to cutting salaries and/or personnel and when analyzed over the long-term these costs tend to eventually increase.