Last time we talked about the general rule for computing the regular rate to pay overtime for an hourly employee that works at more than one rate in a single workweek. You will recall that the general rule is you do math . . . . and you know how much I love to do math . . . . and compute the weighted average hourly rate. But we also talked about the “basic rate” concept and what a pain that was.
What about the other exceptions listed in the general rule? Are they this impossible too? Well, no, they are not. And really we are talking about one basic exception, the one we already talked about when we did the post on pieceworkers. Remember? Find it here. So what is the deal?
Sections 7(g) (1) and (2) of the Act provide:
(g) No employer shall be deemed to have violated subsection (a) by employing any employee for a workweek in excess of the maximum workweek applicable to such employee under such subsection if, pursuant to an agreement or understanding arrived at between the employer and the employee before performance of the work, the amount paid to the employee for the number of hours worked by him in such workweek in excess of the maximum workweek applicable to such employee under such subsection:
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(2) In the case of an employee performing two or more kinds of work for which different hourly or piece rates have been established, is computed at rates not less than one and one-half times such bona fide rates applicable to the same work when performed during nonovertime hours;
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29 CFR § 778.415.
So, like we said with pieceworkers, basically, what this Regulation says is that you can agree with the employee IN ADVANCE (and I would do it in writing) that you can pay overtime and the hourly rate for the job being done when the overtime is worked instead of doing the average. Now, there are some rules that make sure that you are not taking advantage of the employee. For example, you can’t agree on a rate lower than the minimum wage (29 CFR § 778.417) and:
(a) Under section 7(g)(2) an employee who performs two or more different kinds of work, for which different straight time hourly rates are established, may agree with his employer in advance of the performance of the work that he will be paid during overtime hours at a rate not less than one and one-half times the hourly nonovertime rate established for the type of work he is performing during such overtime hours. No additional overtime pay will be due under the act provided that the general requirements set forth in §778.417 are met and;
(1) The hourly rate upon which the overtime rate is based is a bona fide rate;
(2) The overtime hours for which the overtime rate is paid qualify as overtime hours under section 7(e) (5), (6), or (7); and
(3) The number of overtime hours for which the overtime rate is paid equals or exceeds the number of hours worked in excess of the applicable maximum hours standard.
(b) An hourly rate will be regarded as a bona fide rate for a particular kind of work if it is equal to or greater than the applicable minimum rate therefor and if it is the rate actually paid for such work when performed during nonovertime hours.
29 CFR § 778.419. There is also a Regulation, 29 CFR § 778.420, that deals with employees who work on a combined hourly and piece rate that says about the same thing: You can agree with the employee.
And one more thing before we leave this short Regulation that turned into a somewhat longer post: If you pay daily overtime or Saturday and Sunday overtime pursuant to a state law or a union contract, you get credit for that toward your obligations to pay weekly overtime.
Where overtime rates are paid pursuant to statute or contract for hours in excess of 8 in a day, or in excess of the applicable maximum hours standard, or in excess of the employees’ normal working hours or regular working hours (as under section 7(e)(5) or for work on “special days” (as under section 7(e)(6), or pursuant to an applicable employment agreement for work outside of the hours established in good faith by the agreement as the basic, normal, or regular workday (not exceeding 8 hours) or workweek (not exceeding the applicable maximum hours standard) (under section 7(e) (7), the requirements of section 7(g) (1) and 7(g)(2) will be met if the number of such hours during which overtime rates were paid equals or exceeds the number of hours worked in excess of the applicable maximum hours standard for the particular workweek. It is not necessary to determine whether the total amount of compensation paid for such hours equals or exceeds the amount of compensation which would be due at the applicable rates for work performed during the hours after the applicable maximum in any workweek.
29 CFR § 778.421.
Next time, we will talk about payments other than cash and computing overtime.