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:
* * * * *
(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.