Karen Harstein worked for Hyatt Corporation. She, and a certified class of employees who were laid off in March 2020, sued Hyatt. Among other things, they alleged that Hyatt violated the Fair Labor Standards Act (FLSA) by failing to include the value of the free hotel rooms they received each year in their regular rate of pay. The FLSA “regular rate of pay” is used to calculate the amount of overtime pay and includes many forms of remuneration.
Courts liberally construe the FLSA in favor of employees and require employers to bear the burden of proving that a particular form of remuneration is not included in the FLSA regular rate of pay. The employees argued that the value of the free hotel room benefit they received should have been included in the regular rate of pay. Hyatt argued that the value of the rooms were “gifts” which could be excluded from the regular rate of pay.
The district court agreed with Hyatt. That court reasoned that the value of the rooms were gifts that could be excluded from the regular rate. According to that court, the rooms were a reward for service that was not related to hours worked, production, or efficiency. The employees appealed.
The Ninth Circuit Court of Appeals found that the rooms were not gifts, but that Hyatt could still exclude their value from the FLSA regular rate of pay as “other similar payments” under the FLSA at 29 USC Section 207(e)(2) and under the FLSA regulation codified at 29 CFR Section 778.224. The Ninth Circuit determined that the “other similar payment” exception applied to the rooms because the regulation listed “[d]iscounts on employer-provided retail goods and services” as an example of an “other similar payment.” The Ninth Circuit affirmed the district court’s grant of summary judgment as to this issue.
Hartstein v. Hyatt Corp., 82 F.4th 825 (9th Cir. 2023).
Key Takeaway: The value of an employer-paid hotel room may be excluded from the FLSA regular rate of pay under the “other similar payment” exception as a discount on an employer-provided retail good or service.