Lawsuits challenging employers’ regular-rate-of-pay calculations under the Fair Labor Standards Act are likely to trend higher in the coming years, Samantha Rollins Murphy, partner at Faegre Drinker, told attendees at a Nov. 19 National Employment Law Institute virtual event.
In order to determine the amount of overtime pay due to an eligible employee, employers must know the number of hours the employee has worked over 40 hours in a given workweek, as well as the employee’s regular pay rate, according to U.S. Department of Labor guidance. The rate is a function of total compensation — including wage supplements like certain nondiscretionary bonuses — divided by the number of hours worked.
The FLSA’s regulations provide an exhaustive list of payments excludable from the regular rate, but many employers still fail to ensure that they include everything that the law requires, Murphy said. She specifically identified shift differentials, attendance bonuses, safety bonuses, retention bonuses and some referral bonuses as common sticking points.
“Many employers are screwing that up,” Murphy said of regular-rate payment omissions. The legal consequences are apparent: “I am seeing more and more regular rate-only cases brought by the plaintiffs’ bar,” she added.
The trend began in states like California but is spreading in the form of nationwide collective actions, Murphy said. She encouraged employers to audit their regular-rate calculations in advance of anticipated legal...
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