Back to Basics: What is a Belo Plan, How Does It Impact Overtime Compensation, and Can Government Contractors Use Such a Compensation Method?
"If you don't know where you are going, any road will take you there."
-Lewis Carroll, Alice In Wonderland
In Walling v. Belo Corp., 316 U.S. 624 (1941), an employer whose employees worked irregular hours and were paid fixed weekly salaries. The employer entered into contracts with them, individually, which in each case specified a basic rate of pay per hour, for the maximum hours fixed by the Fair Labor Standards Act (“FLSA”). The contract also provided for not less than one and one-half times that rate per hour for overtime, with a guaranty that the employee should receive each week for regular time and overtime not less than an amount specified.
Under this plan, the employee worked more than the statutory maximum regular hours before he became entitled to any pay in addition to the weekly guaranty, but when he or she worked enough hours to earn more than the guaranty, the surplus time was paid for at 150 percent of the “basic,” or contract rate. The Supreme Court held that the rate per hour so agreed on was the “regular rate” within the meaning of the FLSA. The “Belo” plan, named after the above Supreme Court decision, was given legislative sanction by the FLSA Amendments of 1949. See 29 U.S.C. §207(f).
There are two primary requirements for an enforceable Belo plan:
First, there must be a specific agreement between the employer and his employees, although such agreement need not be in writing. 29 C.F.R. §778.407; Triple “AAA” Co. v. Wirtz, 378 F.2d 884 (10th Cir. 1967) cert. denied, 389 U.S. 959 (1967); Wirtz v. Leon’s Auto Parts Co., 406 F.2d 1050 (5th Cir. 1969) (employer had not entered into an express agreement with his employees, held, “Belo” plan had not been proven).
The second requirement is that the employees’ duties must “necessitate irregular hours of work.” 29 U.S.C. §207(f). This has sometimes (but not always) been interpreted to mean that the irregular hours must be during both the regular hours and overtime hours. 29 C.F.R. §778.406. Thus, where the employees work at least forty hours during each week, but the overtime hours vary from week to week, it is usually held that the irregular hours requirement has not been met. See Donovan v. Brown Equip. and Serv. Tools Inc., 666 F.2d 148 (5th Cir. 1982) (in discussing the meaning of the term “irregular hours of work,” the court described it as not “merely a fluctuating long workweek, consisting only or mostly of variations in the hours required over forty . . . they must, in a significant number of weeks, fluctuate both below forty hours per week as well as above, and the fluctuations below forty must result from work requirements, not vacations, holidays, illness or reasons personal to the employee.”); Donovan v. Welex, 25 W.H. Cas. (BNA) 1001 (S.D. Tex. 1982). To determine whether an employee works “irregular” hours as required for application of the Belo exception, an employee’s regularly scheduled days off should be excluded from the calculation of how many non-overtime hours the employee worked in a workweek.
Accordingly, a valid Belo plan allows for the payment of a fixed amount which includes the guaranteed overtime. Of course, any hours worked in excess of the hourly guarantee must still be paid at an additional premium overtime rate. By the way, Government contractors are allowed to use Belo plans and they comply with the requirements of the Contract Work Hours and Safety Standards Act (“CWHSSA”).
If you have a “failed” Belo plan, then you have essentially a fixed salary for the guaranteed number of hours set forth in the plan. That fixed salary should make the employer eligible for any overtime pay deficiencies for hours worked in excess of 40 hours a week, but only after using the so-called fluctuating work week half-time overtime premium payment method. See https://www.awrcounsel.com/blog/2019/9/6/back-to-basics-applying-half-time-overtime-the-fluctuating-work-week?rq=Fluctuating%20%20work.