What Types of Payments Can Be Credited Towards Overtime Owed to an Employee?

The Fair Labor Standards Act (FLSA) authorizes employers to credit only three types of payments towards the amount of overtime wages owed to an employee.  Those three types of payments are:

  1. Overtime Premiums:  Extra compensation provided by a premium rate paid for certain hours worked by the employee in any day of workweek because such hours are hours worked: (i) in excess of eight in a day; (ii) in excess of the maximum workweek applicable to such employee under the FLSA; or (iii) in excess of the employee’s normal working hours or regular working hours, as the case may be.
  2. Holiday and Weekend Premiums:  Extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in nonovertime hours on other days.
  3. Shift Differentials:  Extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective bargaining agreement, for work outside of the hours established in good faith by the contract or agreement as the basic, normal, or regular workday (not exceeding eight hours) or workweek (not exceeding the maximum workweek applicable to such employee under the FLSA), where such premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for like work performed during such workday or workweek.

29 U.S.C. § 207(e, h).  No other types of overtime compensation may be credited towards overtime pay owed to an employee under the FLSA.

Takeaways:  Employers who pay holiday or weekend premiums or shift differentials to employees may be able to credit those payments towards overtime compensation owed to employees.  Employers should review their pay practices to ensure that they are paying overtime correctly under the FLSA and that they are taking appropriate credit for any of the three types of payments listed above.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on June 20, 2012, in Wage and Hour and tagged . Bookmark the permalink. Leave a comment.

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