How Do You Calculate An Employee’s Regular Rate of Pay For Overtime Purposes Under the Fair Labor Standards Act (FLSA)?

Under the overtime provision of the Fair Labor Standards Act (FLSA), employers are generally required to pay non-exempt employees at least one-and-one-half their “regular rate of pay” for all hours worked in excess of 40 hours in a single workweek (or 48 hours in a single workweek if only Minnesota law applies).

The Department of Labor’s regulations for the FLSA provide that an employee’s regular rate of pay cannot “be left to a declaration by the parties,” but instead must be “drawn from what happens under the employment contract.”  29 C.F.R. § 778.108.  In most cases, an employer can calculate a non-exempt employee’s “regular rate of pay” by using the following formula:

  • First, determine the employee’s total remuneration for the workweek;
  • Second, subtract any payments that may be credited towards overtime under the FLSA’s statutory exclusions (e.g., overtime premiums, certain holiday and weekend premiums, etc…);
  • Third, divide the resulting total by the total number of hours actually worked by the employee during the workweek.

29 C.F.R. § 778.109.  The result of the above formula is the employee’s “regular rate of pay” for purposes of calculating overtime under the FLSA.

Takeaway:  Employers can mitigate the potential risk of liability under the FLSA by making sure to calculate an employee’s regular rate of pay using the correct method under the FLSA.

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 December 3, 2012, in Wage and Hour and tagged . Bookmark the permalink. Leave a comment.

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