Archive for August, 2014

That’s not my job! Oh yes it is. Working at two or more rates. Part 2.

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.

That’s not my job! Oh yes it is. Working at two or more rates. Part 1.

Back in the day, when I was working in a union shop working my way through undergrad, I was a summer replacement in the bakery. I happened to be able to do most of the jobs in the plant, so after a while I was put in a position where I switched from job to job, often in the same workweek. You know what else I did? I worked a lot, and I mean a lot, of overtime. I needed the money to pay for school. So how do you figure overtime in a workweek in which an employee works at more than one rate? What is the regular rate for that? Well first, there is a general rule:

Where an employee in a single workweek works at two or more different types of work for which different non-overtime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates. That is, his total earnings (except statutory exclusions) are computed to include his compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs. Certain statutory exceptions permitting alternative methods of computing overtime pay in such cases are discussed in §§778.400 and 778.415 through 778.421.

29 CFR § 778.115.

So if I work at two or more rates in a single workweek, my employer has to use a “weighted average” to figure out the regular rate and then pay overtime on that computed regular rate.

But what are these “alternative methods” that the Regulations speak of? Well, let’s take a look.

Section 7(g)(3) of the Act provides the following exception from the provisions of section 7(a):
(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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(3) is computed at a rate not less than one and one-half times the rate established by such agreement or understanding as the basic rate to be used in computing overtime compensation thereunder: Provided, That the rate so established shall be authorized by regulation by the Secretary of Labor as being substantially equivalent to the average hourly earnings of the employee, exclusive of overtime premiums, in the particular work over a representative period of time; and if (i) the employee’s average hourly earnings for the workweek exclusive of payments described in paragraphs (1) through (7) of subsection (e) are not less than the minimum hourly rate required by applicable law, and (ii) extra overtime compensation is properly computed and paid on other forms of additional pay required to be included in computing the regular rate.

29 CFR §778.401.

What? We are not going to go into this in great detail, but here is the gist. Section 7(g)(3) of the FLSA allows employer to pay overtime based on an established “basic rate” rather than the regular rate but in order to do so the employer has to comply, to the letter, with the very strict Regulations contained in Section 7(g)(3)of the FLSA and part 548 of the Regulations. There are 6 basic requirements: 1. The employer and employee have to agree to the rate; 2. The rate is a specified rate or can be calculated based on a specified formula; 3. The basic rate is authorized by part 548.3 or by the Administrator of the Wage Hour Division; 4. The basic rate minus authorized deductions has to be greater than the minimum wage; 5. All overtime must be paid at a rate of at least one and one-half times the basic rate; and 6. Any additional overtime not covered by the basic rate agreement has to be properly calculated and paid. So, if you want to do this, TALK TO YOUR LABOR LAWYER FIRST.

Next time we will talk about the other exceptions to the general rule.