I read an interesting post by Frank Shuster of Constangy, Brooks, Smith on the thorny and often misunderstood issue of the “regular rate” and what that concept entails for compliance with the FLSA. Many employers, well-intentioned and seeking to comply with the law, often think that overtime is (simply) based upon the employee’s assigned rate (e.g., $20 per hour) and if they pay that amount (i.e., $30 per hour), they are complying with the FLSA (and State law). That assumption, however, is incorrect.
For example, a class action has recently been filed against Anheuser-Busch, alleging various violations of wage-hour law. The plaintiffs charge that the Company did not properly calculate the regular rate, meaning that it did not include various supplements and emoluments. The case is in a very early stage, but the allegations highlight this troublesome issue. It is a problem that extends to all employers, big and small.
As the post points out, it is not always just that straight hourly rate that forms the basis for overtime computations. Employers offer all manner of supplements and incentives, from production and attendance bonuses, to shift differentials, and other promised bits and pieces of compensation. These extra monies (often small amounts) if they are promised (e.g., in a policy or Handbook) to employees and the employees earn the extra money, those amounts must be added into the ordinary regular rate and a new, higher regular rate is established on which overtime...
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