Aviation Staffing Company Used ‘per Diem’ Scheme to Avoid Paying Overtime, Lawsuit Says

Why It Matters

If the court rules against CASM, it could trigger a sector‑wide reassessment of per‑diem pay practices, raising overtime liabilities for aviation staffing firms and reinforcing FLSA enforcement.

Key Takeaways

• CASM paid $8‑$8.75 taxable wage, $24 per diem.
• Overtime calculated only on taxable wage, not total rate.
• Lawsuit seeks collective and class relief for 100+ workers.
• Prior DOL guidance bars per‑diem schemes that lower regular rate.

Pulse Analysis

The aviation maintenance industry has long relied on per‑diem allowances to offset travel and tool costs, but regulators increasingly view the practice as a loophole when employers use it to depress the regular rate of pay. The Department of Labor’s 2024 opinion letter clarified that reimbursements cannot be used to artificially lower overtime calculations, echoing earlier appellate decisions that struck down similar schemes. This regulatory backdrop sets the stage for the CASM lawsuit, which alleges that the company split wages into a minimal taxable component and a sizable untaxed per diem, effectively sidestepping overtime obligations.

In the present case, the plaintiff earned a combined $32.75 per hour—$8‑$8.75 taxable plus a $24 per diem—yet overtime was computed only on the taxable slice. Under the Fair Labor Standards Act, overtime must be calculated on the employee’s total regular rate, which would have yielded $49.13 per hour for overtime work. By capping the per diem at 40 hours and adjusting it downward for overtime, CASM allegedly reduced the worker’s overtime compensation to $13.13 per hour, far below legal requirements. If the court grants the collective and class relief sought, the company could face back‑pay liabilities for over a hundred mechanics spanning two to three years.

Beyond CASM, the case signals a warning to staffing firms that employ per‑diem structures across the United States. Companies will likely need to audit compensation models, ensure that any reimbursements are bona fide expense offsets, and adjust payroll systems to reflect the full regular rate for overtime calculations. Legal counsel and HR leaders should monitor the outcome, as a ruling in favor of the plaintiffs could catalyze a wave of similar actions, prompting industry‑wide compliance overhauls and potentially reshaping labor cost forecasts for aviation service providers.