The US Department of Labor (DOL) recently issued an opinion letter that reminds employers how to properly calculate an employee’s regular rate of pay for purposes of overtime compensation.
In this letter, the DOL was responding to an inquiry about whether a company’s compensation plan, which pays an average hourly rate that may vary from workweek to workweek, complies with the Fair Labor Standards Act (FLSA). Specifically, to calculate weekly pay, the company was multiplying an employee’s time with clients by his or her hourly pay rate for such work. The employer then divided the product by the employee’s total hours worked. The company then explained that its “standard rate of pay” was $10 per hour and that it paid overtime based on the $10 per hour rate.
According to the DOL, while the employer’s plan likely complied with the FLSA’s minimum wage requirement (that an employee is paid at least minimum wage for every hour worked), it might not comply with the FLSA’s overtime requirement. Continue reading NEW GUIDANCE: DOL Reminds Employers How To Properly Calculate The Regular Rate Of Pay