Archive for September, 2014

Does anybody really do this anymore? Non-Cash Payments and the regular rate.

Back in April we did a post on payments under the FLSA and I put a link in to a song called 16 Tons. It is an old song about an employee who can’t quit his job because he owes the company store more than he makes. Hard to believe isn’t it? That you could work your tail off and end up owing the company more than they owe you. But back in the olden days, and trust me, given my age, when I say olden days I mean olden days, some companies provided more than just pay to their employees. For those of you who are not into history or who are a bit younger, Wiki defines company town as:

A company town is a place where, at least initially, practically all stores and buildings are owned by the one joint-stock company that has a geographically-linked business need and so provides employment and infrastructure (housing, stores, transportation, sewage and water) to support the effort. Typically, such towns are founded in a remote location, so that residents cannot easily commute or shop elsewhere, . . . .”

See http://en.wikipedia.org/wiki/Company_town

The Encyclopedia of Chicago states:

The most ambitious and controversial project of company housing was conceived by railroad car magnate George M. Pullman, who in 1880 founded the town of Pullman on Chicago’s southern suburban fringe. As part of Pullman’s paternalistic social vision, his housing was designed to foster in workers the virtues of industriousness, temperance, thrift, and cleanliness. All dwellings, from the bachelor apartments to the free-standing houses, featured running water, gas, and garbage disposals. The Pullman companies maintained total control over housing: they owned the land and buildings, set the rents, screened (and evicted) tenants.

See http://www.encyclopedia.chicagohistory.org/pages/324.html

So why on earth am I telling you all of this. Because I like history. And because there is actually a regulation that deals with this sort of thing.

Where payments are made to employees in the form of goods or facilities which are regarded as part of wages, the reasonable cost to the employer or the fair value of such goods or of furnishing such facilities must be included in the regular rate. (See part 531 of this chapter for a discussion as to the inclusion of goods and facilities in wages and the method of determining reasonable cost.) Where, for example, an employer furnishes lodging to his employees in addition to cash wages the reasonable cost or the fair value of the lodging (per week) must be added to the cash wages before the regular rate is determined.

29 CFR § 778.116.

So, if you provide housing to your non-exempt employees as part of their compensation, you have to include the fair market value of that housing when you are calculating the regular rate for that employee and figuring the resulting overtime rate. And that is that. Oh by the way, if you are thinking nobody provides housing to workers anymore, think again. In fact it is so common for migrant farm workers that many states, including Michigan, have licensing requirements for providing housing. See http://michigan.gov/mdard/0,4610,7-125-1569_45168—,00.html

Next week we start talking about commissions and the regular rate.