Oregon Court Summarily Dismisses Manufacturing Establishment Overtime Claims

By Scott Seidman and Haley Morrison

On March 9, 2017, a Multnomah County judge dismissed the claims asserted by a putative class of workers in the closely-watched case Mazahua Reyes, et al. v. Portland Specialty Baking, LLC.

All Oregon non-exempt employees are entitled to overtime for hours worked over 40 in any workweek. Unlike employees in other industries, however, those working in a “manufacturing establishment” are also entitled to daily overtime when they work more than 10 hours in any work day.

The Oregon Administrative Rules define “manufacturing establishment” as “any place where machinery is used for manufacturing purposes.” The term “manufacturing” is defined broadly, and essentially means taking raw materials and turning them into something else, as long as the work is done in a factory, mill, or other similar settling. “Machinery” is similarly expansive, and includes virtually all equipment powered by a source other than the human body.

Oregon manufacturing employers have uniformly calculated overtime by separately computing daily overtime hours and weekly overtime hours, and paying the employee the greater of the two. Thus, if an employee worked a 44-hour workweek consisting of 11-hour workdays, the employee is paid four overtime hours. Until recently, BOLI’s Field Operations Manual supported this calculation method.

In contrast, the Mazahua Reyes plaintiffs argued that manufacturing employers are actually required to compute each type of overtime separately, and then pay both. In other words, an employee working a 44-hour workweek of four 11-hour workdays would be entitled to four hours of daily overtime and three hours of weekly overtime, totaling seven hours of overtime pay. (The plaintiffs argued that the 11th hour on the fourth day would only need to be paid once, in an attempt to make their argument comply with specific wording in the weekly overtime statute.) In December 2016, during the pendency of this litigation, BOLI issued new guidance, consistent with plaintiffs’ arguments in this case, except that BOLI’s interpretation did not make the exception for the 11th hour on the fourth day but instead would have required employers to pay that hour as both a daily and a weekly overtime hour.

In its Motion to Dismiss or in the Alternative Summary Judgment, Tonkon Torp, representing Defendant Portland Specialty Baking, argued that plaintiffs’ interpretation was not supported by the manufacturing establishment statutes, and that BOLI’s newest guidance was not entitled to deference. The Court agreed, concluding that Defendant’s interpretation is the only one that complies with both the daily and weekly overtime statutes in all instances, as well as the Oregon Administrative Rules. As a result, employers must pay “the greater of daily or weekly overtime” at the overtime rate, and not both.

It remains to be seen whether the plaintiffs will appeal the ruling. We will keep our clients updated if they do.

This client update is prepared for the general information of our clients and friends. It should not be regarded as legal advice. If you have any questions regarding this update, or for more information about this topic, please an attorney in our Labor & Employment practice group, or the attorney with whom you normally consult.

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