By Jonathan K. Driggs, Attorney at Law
True story.  A U.S. Department of Labor (DOL) Investigator met with a company’s HR manager to interview him regarding a complaint an employee had filed under the Family & Medical Leave Act (FMLA).  In the middle of the interview—and completely out of the blue—the Investigator turned to the HR manager and asked, “how do you calculate overtime pay?”  Now, overtime pay had nothing to do with this FMLA complaint.  Rather, the Investigator was attempting to turn his visit into a company-wide wage and hour audit starting with whether the employer was calculating employees’ regular rates correctly when determining overtime pay.

Most of us are aware that under the Fair Labor Standards Act (FLSA), non-exempt employees are eligible to receive time and a half their “regular rate” (RR) for any hour worked over 40 in a workweek.  But here’s what the Investigator was going after: many employers think that the “regular rate” is synonymous with “straight time” (or the employee’s hourly rate) when often it is not.

The FLSA requires many types of additional compensation paid to employees to be included in RR calculations.  For example, let’s say you have an employee who makes $10 an hour.  In one week she works 45 hours.  So, you quickly do the math and assume that she makes an overtime premium of $5 an hour for the 5 hours she worked over 40 in that week (1/2 x $10 = $5).  But hang on a minute: does this employee receive any bonuses or commissions?  Let’s say she received a commission of $100 that was earned during this week.  The FLSA requires you to include that as part of the RR.  So her true RR is $12.22 an hour, not $10, and her hourly overtime premium would be $6.11 not $5.

Under the FLSA, you get the true regular rate by taking all (or nearly all) compensation earned by the employee during the workweek (e.g., hourly pay plus commissions earned) and dividing it by the total hours worked in the particular workweek ($450 straight time plus $100 commission divided by 45 hours equals $12.22).  Keep the following in mind:

So what happened in my story about the DOL Investigator?  Well, several years before, that employer had decided to get into full compliance and make sure it included all of its bonuses and commissions into its RR calculations.  Thus, the HR manager was able to show the Investigator that the company was complying with the law.  The Investigator went away and everyone lived happily ever after.  It is my sincere hope that such an inquiry by the DOL into your organization’s overtime practices will have a similar outcome.

This article should not be construed as legal advice.  Copyright ©2012 by Jonathan K. Driggs, Attorney at Law, P.C.  All rights reserved.

Jonathan K. Driggs is an employment law attorney with over 19 years of experience, including 3 years with the Utah Labor Commission.

Call an HR Attorney as often as you need, for a low, fixed monthly fee!  In partnership with Payroll Experts, Jonathan is offering his “HR Legal Compliance Service” to Payroll Experts clients at discounted rates.  For a low, fixed monthly fee, you can call Jonathan as often as you need to get answers to your HR legal compliance and employee relations questions.  Get rid of the attorney’s ticking clock!  For more information, please contact Payroll Experts at (801) 221-3732 and ask about the “HR Legal Compliance Service.”


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