IT Overtime and Severance: Confusing the Issue

Houston, TXIssues surrounding IT overtime are often complicated by whether or not an employee has been classed as exempt. As demanding and complex a job as IT is, determining who is exempt from claiming overtime and who isn't can be just as confusing. Add to that the attempts by some employers to stroke their bottom line by miss-classifying a deserving employee as overtime exempt, and you have a situation fraught with issues and unfairness.

However, in the overtime world there are other issues that affect overtime, and not just programmer overtime either—but anyone who may have an overtime issue with their employer that's further complicated by a layoff and severance.

A recent court decision, while not necessarily stemming from an overtime lawsuit, does serve to illustrate issues and legal positions that can emerge during litigation.

In Martin v. PepsiAmericas Inc., the plaintiff worked for the defendant as a route settlement clerk for a period of about five years. She was paid on an hourly basis and therefore qualified for overtime. That all changed when the plaintiff was promoted to route settlement supervisor and moved to a salaried position.

The plaintiff was laid off two years later, accepting a severance package offered by her employer. Financial terms of the severance were not disclosed, save for an agreement not to file lawsuits against the employer.

Nonetheless, two years after her termination, the plaintiff filed suit against PepsiAmericas, alleging unpaid overtime based on a claim that her status as supervisor might not have been correctly exempt from overtime under the Fair Labor Standards Act (FLSA).

Here is where the issue that one might not think about—computer programmer or otherwise—comes in. The defendant petitioned to have the case dismissed through a "setoff," suggesting that the amount claimed by the plaintiff for unpaid overtime failed to exceed the amount of severance paid to the plaintiff upon her termination. The Fifth Circuit Court agreed, dismissing the plaintiff's claim.

However, on appeal, the US Court of Appeals for the Fifth Circuit disagreed with that position, finding that the severance was paid solely in exchange for a release from future claims. It was noted that the plaintiff did not have a right to a severance, but was paid a severance anyway for reasons already stated.

The higher Court noted that while the defendant could turn around and sue the plaintiff for breach of contract, the defendant could not under FLSA interchange severance paid to negate a claim for unpaid overtime. The amount paid by the employer in this case was not for accrued wages already earned or claimed to have been earned by the employee, which might under certain circumstances qualify as a legitimate offset to a claim of unpaid overtime wages, but rather for a release of claims.

The case serves as an illustration of what can transpire were a computer professional to claim computer programmer overtime, in association with a severance. Funds paid as part of a severance, in most cases, cannot be confused or interchanged with a claim for unpaid overtime in the event of an overtime lawsuit.