By Kevin C. McCormick, Whiteford, Taylor & Preston LLP
In a recent unpublished decision, the 4th Circuit—which covers Maryland, North Carolina, South Carolina, Virginia, and West Virginia—held that several employees who worked for an American company overseas were properly classified as hourly employees despite some confusion about the offer letters describing their compensation.
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Background
Several employees who worked for Computer Sciences Corporation (CSC) signed offer letters and foreign travel letters. Some of the offer letters stated, “Your compensation will consist of an hourly rate of $32.93 ($68,500 annually)[,] which will be paid bi-weekly.”
Other employees’ offer letters contained a similar statement but a different hourly rate and no mention of an annual amount. Those letters stated, “Your compensation will consist of an hourly rate of $31.25[,] which will be paid bi-weekly.”
The foreign travel letters detailed the compensation and benefits that each employee would receive while overseas. The section of the letter outlining compensation discussed categories of pay, including base pay, pay differentials, hardship pay, and danger pay. With respect to base pay, the letters stated, “Your base weekly salary will not change as a result of this assignment.”
After joining CSC, the employees were assigned to work overseas. While overseas, they regularly worked 84-hour weeks but received fixed pay for only 40 hours each week. Claiming they were entitled to hourly wages for every hour they worked under their respective offer letters and foreign travel letters, the employees filed suit.
The trial court concluded that the letters unambiguously provided for hourly wages rather than fixed salaries and entered judgment in favor of the employees. CSC appealed.
Decision on appeal
On appeal, the 4th Circuit phrased the issue as a question of whether each employee’s offer letter and foreign travel letter, construed as a single contract, provided for hourly wages or a fixed salary when the employee was oversees.
To determine the parties’ intent, the court focused on the specific language of each letter. The court found that the offer letters unambiguously provided for hourly wages; however, the parties’ dispute centered on the meaning of the term “base weekly salary” in the foreign travel letters, which discussed “base pay.”
The employees contended that “base weekly salary” was simply an hourly rate stated in weekly terms with no effect on their base pay. They further argued that under the terms of the offer letters and the foreign travel letters, employees working overseas were entitled to the same hourly wages they would receive while working in the United States.
CSC, on the other hand, argued that the foreign travel letter controlled the compensation terms of an employee’s overseas assignment and the “base weekly salary” therefore trumped the hourly wages in the offer letter. CSC maintained that the offer letter and the foreign travel letter provided for a fixed salary when an employee worked overseas, paid without regard to whether the employee worked more or fewer than 40 hours per week. The appellate court disagreed.
The 4th Circuit found that when the two letters were read together, they unambiguously provided for hourly wages for every hour worked rather than a fixed salary when the employee was working overseas. Although the foreign travel letter didn’t define the term “base weekly salary,” it stated unequivocally that when an employee was on an overseas assignment, his “base weekly salary will not change as a result of this assignment.”
According to the court, that statement appeared to be a clarification of “base pay” and indicated that the parties intended an employee working overseas to be entitled to the same base pay he would receive when he wasn’t working overseas.
Since the foreign travel letter was otherwise silent on the meaning of “base weekly salary,” the court looked at the offer letter to determine the base pay an employee would receive when he worked in the United States. The offer letter expressed an employee’s base pay in terms of “hourly rate.” That rate therefore represented the employee’s base pay, which would not change when he worked overseas, regardless of whether it was stated in hourly or weekly terms.
According to the court, merely invoking the term “salary” doesn’t transform hourly pay into fixed pay. The court found CSC’s arguments to the contrary unpersuasive. Neither letter stated that the foreign travel letter superseded the offer letter when an employee was overseas, nor did either letter specify that an employee’s weekly pay was capped at 40 hours per week, regardless of the number of hours he worked. To accept CSC’s interpretation of the letters would be to rewrite their terms, which the court declined to do.
CSC also contended that employees were paid more than $37 an hour while they were overseas, including discretionary pay differentials and hardship pay. The court found that such “after the fact rationalizations” didn’t alter the meaning of the offer letters.
By capping base pay at 40 hours per week when employees regularly worked 84-hour weeks, CSC effectively reduced their hourly wages from $31 or $32 to around $15. The court found that neither letter contained language demonstrating that the parties intended such a result. George Richell, et al. v. Computer Sciences Corporation, 4th Cir., Case No. 14-2366, decided May 2, 2016.
Bottom line
This decision highlights the importance of carefully reviewing your offer letters and other communications detailing employees’ pay rates. The offer letters in this case clearly indicated that employees would be compensated on an hourly basis.
However, the foreign travel letters suggested that CSC had a different intent when employees were on foreign assignments because they were entitled to receive other compensation, such as pay differential and hardship pay. However, that intent wasn’t clearly set forth in the foreign travel letters.
When the two letters were read together, it appeared to the court, and most readers, that the parties never intended to convert hourly employees in the United States to salaried employees when they worked overseas. No doubt, CSC could have achieved that result by including specific language to that effect in the foreign travel letters along with an explanation that the foreign travel letters superseded any prior agreements regarding compensation.
Kevin C. McCormick, an editor of Maryland Employment Law Letter, can be reached at kmccormick@wtplaw.com or 410-347-8779.