HUMAN RESOURCES TIP

It is common knowledge that the Fair Labor Standards Act ("FLSA") requires employers to pay one and one-half times an employee's "regular rate" for all work performed in excess of 40 hours per week. What is too often overlooked, however, is the proper method for determining the regular rate. To avoid extensive liability from noncompliance with the overtime mandates, including liquidated damages and attorneys' fees, employers must understand all the components of the "regular rate."

The regular rate includes "all remuneration for employment paid to, or on behalf of, the employee." (29 U.S.C.§ 207(e).) It is the "hourly rate actually paid for the normal, non-overtime workweek." (Walling v. Helmerich & Payne, 323 U.S. 37, 40 (1944).) Regardless of the basis on which the employee is actually paid (e.g., hourly, salary, commission), the regular rate is always an hourly rate. (29 C.F.R. § 778.109.) Additionally, the regular rate must be determined for each particular workweek, even if the employee is paid less frequently than weekly.

The starting point for determining an employee's regular rate for a particular week is to divide total earnings by the total hours for which payment is made. For single-rate hourly employees, the regular rate is the hourly rate. This, however, is only the beginning; other forms of compensation raise additional considerations. Specifically, employers must consider 1) non-exempt salaried employees, 2) commission payments, and 3) the statutory exclusions from the regular rate.

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NOTE: This article is not legal advice, and should not be relied upon as such. Always consult an experienced professional before making decisions about your particular circumstances.