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Fair Labor Standards Act: Calculating an Employee’s Regular Rate

Introduction

The Fair Labor Standards Act (“FLSA”) is a federal law that establishes both minimum wage and overtime requirements for private and public employers. Under the FLSA, an employer must pay non-exempt employees at least the federal minimum wage for every hour worked and overtime for every hour worked in excess of forty (40) in a workweek. However, when calculating an employee’s regular rate for the purpose of overtime pay, the regular rate is calculated in a specific way depending upon how the employee is paid.

Regular Rate

Generally, overtime must be compensated at a rate not less than one and one-half times the regular rate at which an employee is actually employed. The regular rate is a rate per hour and cannot fall below the current statutory minimum of $7.25. However, the FLSA does not require an employer to compensate an employee solely on an hourly basis, rather an employee may be paid on a piece-rate, salary, commission, or other basis. Regardless of the compensation type, overtime due to employees must be calculated on the basis of the hourly rate derived from the compensation type used. Thus, in calculating overtime due, it is necessary to compute the regular hourly rate during each workweek.

Regular Rate Generally

If an employee is paid solely on the basis of a single hourly rate, this hourly rate is the employee’s regular rate. For example, a non-exempt employee paid at a rate of $12.00 per hour, who works forty-six (46) hours in a week, should receive pay at $12.00 per hour for forty (40) hours and then time and a half of $18.00 for the six (6) hours of overtime. This comes to a total weekly wage of $588.00. Generally, the regular hourly rate is calculated by dividing the total compensation received for employment in any workweek by the total number of hours actually worked in that workweek for the compensation paid. However, if an employee is paid on another basis, such as salary or piece-rate, the regular rate is calculated differently than the general method.

Regular Rate for Salaried Employees and Pieceworkers

For employees receiving a weekly salary, the regular hourly rate of pay is computed by dividing the employee’s salary by the number of hours the salary is intended to compensate. For example, if an employee is hired at a salary of $350.00 to compensate for a regular workweek of thirty-five (35) hours, the regular rate of pay is $350.00 divided by thirty-five (35) hours, which results in an hourly rate of $10.00 per hour. When the employee works overtime, the employee is owed time and a half of $15.00 per hour.

For employees paid on a piece-rate basis, the regular hourly rate is calculated by adding together the total earnings for the workweek from piece rates and all other sources and any sums paid for waiting time or other hours worked and then divided by the number of hours worked in the week for which such compensation was paid. For example, if the employee worked fifty (50) hours and earned $491.00 at piece rates for forty-six (46) hours of productive work, in addition to $8.00 per hour for four (4) hours of waiting time, the total compensation of $523.00 is divided by fifty (50) total hour of work. This renders a regular hourly rate of pay of $10.46 and a time and a half rate of $15.69.

If you feel your rights under the Fair Labor Standards Act have been violated, or if you have any other questions regarding your employment rights, please contact the experienced Birmingham employment law attorneys at Wrady Michel & King. You can contact us either online or by calling us at (205) 319-9724. We are here to serve you.