Overtime Pay: Same Song, Second Verse

Friday, January 28, 2011

In a decision handed down by the 10th Circuit Court in Chavez v. City of Albuquerque, 09-2274 and 09-2288, the court concluded that the proceeds from sold leave time must be included in the employee’s regular rate of pay. This translates into requiring ALL regular wages of an employee to be included in any calculation for overtime pay.

In prior cases, employers have been directed to include bonuses in the calculation of overtime under certain conditions. In most situations, bonuses paid at the sole discretion of an organization’s management and extended as “gifts” are generally excluded from an employees' regular rates of pay. However, bonuses paid based on production measurements such as hours, quantity and quality of production, efficiency, and certain other measures are generally subject to inclusion in an employee’s regular rate of pay.

For workers over the age of 15, there is no limitation under Fair Labor Standards Act (FLSA) as to the maximum number of hours which may worked in any workweek. Nor does the FLSA does require overtime pay for hours in excess of eight hours per day. FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or days scheduled as regular days of rest, except in those situations where the time worked is in excess of 40 hours.

While the FLSA provides only for overtime pay at 1 and ½ times the employee’s regular rate of pay. Local governments, states, collective bargaining agreements, and certain contracts may have provisions, which require overtime pay at higher rates of pay, or for time worked in excess of 8 hours per day, or for work on Saturdays, Sundays, holidays, or days scheduled as regular days of rest. Example, the Minimum Fair Wage Law of Massachusetts, M.G.L. c. 136, §§6, 13, and; 16, may require some retailers to pay premium wages on Sundays and certain holidays.  Certain retail workers in Rhode Island are also paid at 1 and ½ times the employee’s regular for Sunday hours worked.

The FLSA sets minimum wage rates for most jobs, however, localities, states, collective bargaining agreements, and certain contracts may have higher rates of pay as minimum wage rates. Thus, overtime is calculated from an employee’s regular rate of pay, which in these cases may be higher that the posted federal minimum rate of pay.

It would be considered a prudent move for an organization to periodically review or have an organization's minimum wage and overtime pay policies audited to ensure that such pay processes and procedures are in line with local, state, and federal guidelines.  Organizations should always seek professional credentialed legal and/or accounting assistance with questions dealing with minimum wage rates, overtime, and other mandated pay and benefits practices.