Can employer legally stop paying time & 1/2 to exempt employee after stating in the offer that they would do so?

Question

Late July I got a job as a computer programmer on a 6 month contract with the agency that recruited me (although I actually work for another company). The job is W-2, paid hourly, but as I'm a computer programmer making over $30/hr I'm overtime-exempt.

However, when the agency told me the offer over the phone, they told me that I would be paid time & 1/2 for overtime and the written offer that I accepted explicitly said exactly what I'd be paid for overtime and it was time and 1/2. Moreover, when I accepted this offer they were trying to pressure me into taking it and tried to make me decide within 2 hours of receiving the offer because they knew I had another very competitive offer. Had their offer not included overtime pay, the other offer would have been much better in comparison and I probably would have chosen that one. Lastly, the job description they sent me before they even sent the offer stated that my target hours are 45 hours a week, so they knew I'd be working overtime as well.

Yesterday, the agency called me and said that because I was classified as exempt, they weren't supposed to be paying me overtime and wouldn't be doing so going forward. They even tried to frame it as them doing me a favor by allowing me to keep the money that I'd already been "wrongfully paid". I pushed back though and will be discussing it with them again later today.

My first question is, being overtime-exempt means they're not required to pay me time & 1/2 for overtime, but they're not prohibited from doing so correct? Like, they're not breaking any laws by paying me extra for overtime?

Secondly, since the offer said in writing that I'd be paid time & 1/2 for overtime and I was told that verbally, are they required to keep paying me that as part of the contract or can they just stop whenever they'd like since I'm exempt?

Answer 1

being overtime-exempt means they're not required to pay me time & 1/2 for overtime, but they're not prohibited from doing so correct?

No, the employer is not prohibited from paying you time & 1/2 for overtime. Nor is the employer doing you a favor with respect to the overtime you have been paid already. The employer looks foolish by telling you "I'm doing you a favor by breaching our contract only for future payments but not for past ones".

are they required to keep paying me that as part of the contract or can they just stop whenever they'd like since I'm exempt?

Yes, the employer is required to keep paying you under the terms of your contract: 1.5 times the normal rate in case of overtime. Your clarification reflects that the notion of "overtime-exempt" is not contemplated in the contract at all, and the employer just brought it up belatedly.

Even if the contract were ambiguous or contradicted itself in this regard, the doctrine of contra proferentem would entitle you to the reasonable interpretation that favors your position (that is because the employer is the party who drafted the contract).

Answer 2

Yes, they owe you time and a half. But, and it's a big BUT: If the contract lets them fire you, then they can just fire you.

So, depending on whether they can let you go, what they're really saying might be, "We can't undo the time and a half we gave you in the past. Going forward, do you want to forfeit the overtime pay, or be let go?"

Answer 3

It sounds like your employer's general policy is to not offer time and a half for exempt employees, but they didn't notice that you were exempt when they made their offer. That's on them, not you.

Companies are free to offer more than what is required. They are no more prohibited from offering time and half to exempt employees, than they are from offering holiday pay for days that are not recognized as legal holidays in their jurisdiction, or paying more than minimum wage. When they offered you $30/hr, it's reasonable to assume they did so because they though that such a wage was necessary to secure your services, not because they somehow thought that the minimum wage is $30/hr. Similarly, you reasonably thought they were offering time and a half not because it was required, but because they wanted to encourage you to take the job.

As for their obligations, that depends on whether the employment is at will, and the wording of the contract. If the contract does not guarantee you any overtime, then they are free to simply not request you work overtime, and the question of overtime rate will then be moot. It will also be moot if they request you work overtime, you refuse, and there are no repercussions for that refusal (other than not receiving the additional money from overtime).

Where things get sticky is if they take action against you for refusing overtime. If they fire you, this is not a for-cause firing; even if the original contract said that you were obligated to work overtime, you agreed to that with the understanding that such overtime would be at time and a half. So this case reduces to the question of whether they can terminate your employment at will. If they can, then they are free to make not terminating your employment contingent on you accepting regular, rather than time and a half, pay on further overtime. If they can't, then you are free to pursue whatever action you would be entitled to for any other unlawful termination.

It gets even more sticky if, as is likely, they don't outright terminate your employment, but "reprimand" you, or otherwise take action against you. In that case, you may have some action available to you, such as a hostile workplace claim.

Answer 4

The contract says time and a half for overtime. The company cannot change the contract, but they can cancel the contract. So it's up to you and up to them: Do they want to switch to a different contractor in the middle of a contract to save a bit of money? Do you want to insist on the pay and risk losing the contract? That's what you need to negotiate.

You should make it clear during the negotiation that a) you won't work for less than the contract says, out of principle, and b) you could have got more than they want to pay, so they won't get anyone of your quality for what they want to pay, and c) it's not your fault, they should blame whoever signed the contract on their side. The more convincing you are, the better the chances that you will stay and get paid overtime.

Just repeating: IF they keep employing you and IF you work overtime, then they have to pay according to the contract. They can cancel the contract, but not change it. That also means that letting you keep the money for earlier time is not "generous", it's what the contract says.

PS. Being slightly "unreasonable" and saying that you won't work for less out of principle even if you lose financially works in your favour.