Math, I Hate Math! Calculating the Regular Rate under the FLSA.

So last time we were talking about the regular rate and overtime and began to discuss how you go about calculating the regular rate.  And as I mentioned last week, the employer and the employee don’t get to decide what the regular rate is – no, it’s all about math.  It’s all about math? Great, math.  My mother wanted me to be an engineer – too much math.  I went to law school so I wouldn’t have to do math.  I can’t do math without a calculator.  Which, by the way, brings me to a complaint I have about my high school math teacher.  His name was Mr. TerHaar.  Don’t get me wrong, I liked Mr. TerHaar, he was a great guy, but he used to make us do long division without a calculator.  I can hear him now:  “You are not going to be able to carry a calculator with you everywhere you go in life.”  Boy, was he wrong.  The stinking thing is on my phone and I have never, and I mean NEVER, had to figure out the cosine of anything in my life.

Wow, that got away from me fast.  So back to the regular rate.  So how do we calculate this thing?  Let’s see what the Regulations say. First, what if you just pay the employee on an hourly basis, nothing else, just an hourly rate?

(a) Earnings at hourly rate exclusively. If the employee is employed solely on the basis of a single hourly rate, the hourly rate is the “regular rate.” For overtime hours of work the employee must be paid, in addition to the straight time hourly earnings, a sum determined by multiplying one-half the hourly rate by the number of hours worked in excess of 40 in the week. Thus a $12 hourly rate will bring, for an employee who works 46 hours, a total weekly wage of $588 (46 hours at $12 plus 6 at $6). In other words, the employee is entitled to be paid an amount equal to $12 an hour for 40 hours and $18 an hour for the 6 hours of overtime, or a total of $588.

29 CFR § 778.110(a).

Look at that, not only does the Regulation tell you how to calculate the regular rate, but it gives you an example.

So remember last time when I told you “Time and one-half of what, you ask?”  And then I said, “Well, that is simple enough, right?  It’s time and one-half of whatever the employee’s hourly rate is, right?” And then I told you that was wrong, but I said: “Well, not really wrong, but not really right either.”  This Regulation is why it’s not really right, but not really wrong to say that the regular rate is whatever hourly rate you pay the employee.  You see, the regular rate can be more than just the employee’s hourly rate when the employee gets other kinds of pay that are not just his hourly rate.  But when the ONLY THING you pay the employee is an hourly rate, AND NOTHING ELSE, then that hourly rate is going to be the regular rate.  And it’s a straight up mathematical computation to determine what the overtime rate is.  Even I can do that.

But how do you do it when the hourly rate is not the only thing you pay the employee?  Or when the employee is not paid on an hourly rate at all?  Well, that is what we are going to talk about over the next couple of posts.  So let’s get to it.

What if you pay an hourly rate but you also pay a production bonus?  Produce X number of parts, or hit a goal for the week, or deal with X number of customer issues and we will pay you a bonus.

Damn, here comes the math.  But that’s ok, there is a Reg for that too.  But you knew that or we wouldn’t be talking about it, now would we?

(b) Hourly rate and bonus. If the employee receives, in addition to the earnings computed at the $12 hourly rate, a production bonus of $46 for the week, the regular hourly rate of pay is $13 an hour (46 hours at $12 yields $552; the addition of the $46 bonus makes a total of $598; this total divided by 46 hours yields a regular rate of $13). The employee is then entitled to be paid a total wage of $637 for 46 hours (46 hours at $13 plus 6 hours at $6.50, or 40 hours at $13 plus 6 hours at $19.50).

29 CFR § 778.110(b).

Ok, that is pretty easy to figure out too, right?  We have thrown some more complicated division into the equation, but it’s still a pretty straight up mathematical calculation.  But part of the reason it is easy is because the production bonus in our example is paid for a single workweek.  What if the production bonus is paid once a month or once a quarter?  Well, then you have to allocate the bonus and the calculation becomes a bit more complex and there is a whole set of Regulations on that, but we are not going to deal with that today.  We will do that when we come to those Regulations.  And that, ladies and gentlemen, is what we call a teaser.

I like this short post thing.  Next time, Pieceworkers.

Steve.