LAWS BY VIOLATION

Miscalculating Overtime Rates

Overtime: Generally.

An employer covered by the FLSA must pay a non-exempt employee overtime at a rate of at least one and one-half times the employee’s regular rate of pay for each hour worked in a workweek in excess of the maximum allowable in a particular type of employment. A maximum 40-hour work week is applicable to almost all employees covered by the Act.

Below are examples provided by the Department of Labor regarding the computation of overtime pay under the FLSA based on employees who are paid hourly, piece rate, and salary:

1. Hourly rate (regular pay rate for an employee paid by the hour) – If more than 40 hours are worked, at least one and one-half times the regular rate for each hour over 40 is due.

Example: An employee paid $8.00 an hour works 44 hours in a workweek. The employee is entitled to at least one and one-half times $8.00, or $12.00, for each hour over 40. Pay for the week would be $320 for the first 40 hours, plus $48.00 for the four hours of overtime – a total of $368.00.

2. Piece rate – The regular rate of pay for an employee paid on a piecework basis is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the full piecework earnings.

Example: An employee paid on a piecework basis works 45 hours in a week and earns $405. The regular rate of pay for that week is $405 divided by 45, or $9.00 an hour. In addition to the straight-time pay, the employee is also entitled to $4.50 (half the regular rate) for each hour over 40 – an additional $22.50 for the 5 overtime hours – for a total of $427.50.

Another way to compensate pieceworkers for overtime, if agreed to before the work is performed, is to pay one and one-half times the piece rate for each piece produced during the overtime hours. The piece rate must be the one actually paid during non-overtime hours and must be enough to yield at least the minimum wage per hour.

3. Salary – The regular rate for an employee paid a salary for a regular or specified number of hours a week is obtained by dividing the salary by the number of hours for which the salary is intended to compensate. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the salary.

4. Tipped Employees – If the employer does not take a tip credit, the normal overtime rules apply. If the employer takes a tip credit, then the overtime rate is calculated by multiplying the sum of the cash wage and tip credit by 1.5 then subtracting out the tip credit. Example: Tipped employee is paid cash wage of $3.00 and a tip credit of $4.25. Take the sum ($7.25) and multiply it by 1.5 to get $10.88. Then subtract the tip credit ($10.88 – $4.25) to get an overtime rate of $6.63.

5. Multiple Positions With Different Rates of Pay – Where an employee in a single workweek works at two or more different types of work for which different straight-time rates have been established, the regular rate for that week is the weighted average of such rates. That is, the earnings from all such rates are added together and this total is then divided by the total number of hours worked at all jobs.

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