Public safety employers continue to be bedeviled by some of the requirements of the Fair Labor Standards Act (FLSA). High up there on the list of problems is how to calculate the overtime rate under the FLSA. Here’s a primer on the basics.

The starting point – and a critical one – is to realize that the FLSA overtime rate is not necessarily time and one-half the employee’s hourly rate. Instead, as phrased in Sections 7(a) and 7(e) of the FLSA, the overtime rate is time and one-half the regular rate of pay. The regular rate may be the hourly rate, but likely is higher.

Think of the regular rate as a fraction. The numerator (or top half) of the fraction is all “remuneration for employment.” The denominator of the fraction is “hours worked.” The process seems simple. Count up remuneration for employment, divide it by hours worked, and you’ve got the regular rate of pay. Multiply it by 1.5 and you’ve got the FLSA overtime rate.

Remuneration for Employment
Hours Worked
=
Regular Rate of Pay

But there are complexities. The first is that the regular rate must be recalculated every week. For police and fire employees covered by the Section 7(k) exemption, the regular rate must be recalculated every work period. Because either the numerator or the denominator of the regular rate fraction can change from workweek to workweek, it is possible for the FLSA to demand a different overtime rate from workweek to workweek.

The next complexity is figuring out what must be included in remuneration for employment. A good shorthand is that remuneration for employment includes virtually everything that shows up on an employee’s paycheck except holiday premium pay, compensation received when paid leave is used, reimbursement for expenses, and contract overtime premiums. This means that the regular rate fraction must include things like:

  • Shift Differential
  • Education Incentive Pay
  • Certification Incentive Pay
  • Hazardous Duty Pay
  • Specialty Pay
  • Working Out Of Classification Pay
  • Sick Leave Buyback Payments

Then there’s the denominator of the regular rate fraction – what should be included there? Unfortunately, there’s a raging debate on the issue. The better take would seem to be that the denominator is “regularly scheduled non-overtime hours worked.” That means that paid leave used by the employee should not be included in the denominator. It also means that overtime hours worked by the employee should not be included in the denominator.

Let’s take a simple example. Assume the employee earns $1,000 a week ($25 per hour straight time) and receives an education incentive of $100 for the week. Here’s how you would calculate the employee’s regular rate of pay:

$1,000 + $100
40
=
$27.50

Now let’s complicate it a bit. Assume the employee earns $1,000 a week, receives an education incentive of $100 for the week, and receives 5.0% premium pay for working in a specialty assignment. Here’s how you would calculate the employee’s regular rate of pay:

($1,000 + $100) + ($1,000 x 5%)
40

Which equals:

$1,100 + $50
40
=
$28.75

Even trickier, assume the same employee works out of classification on Monday, the first day of the workweek, and receives $10 working out of classification pay for the day. The regular rate of the employee would be:

($1,000 + $100) + ($1,000 x 5%) + $10
40

Which equals:

$1,100 + $50 + $10
40
=
$29.00

Consider the previous example for a moment. This means that if the employee works an overtime shift on Saturday, the employee’s overtime rate would be based in part on the working out of classification pay received on Monday, even though the employee was not working out of classification during the overtime assignment.

The same method requires a careful approach with shift differentials. Assume that the same employee was entitled to a 10% shift differential for working the graveyard shift on Monday through Friday. Here’s how the employee’s regular rate of pay would be calculated for the week:

($1,000 + $100) + ($1,000 x 5%) + $10 + ($1,000 x 10%)
40

Which equals:

$1,100 + $50 +$10 + $100
40
=
$31.50

This means that if the employee works a day shift on Saturday on an overtime basis, the employee’s regular rate of pay must be based in part on the shift differential received from Monday through Friday even though the overtime shift was not itself eligible for the shift differential.

I mentioned a raging debate on the question of what should be included in the denominator of the regular rate fraction. Some courts find that the denominator must be limited to regularly scheduled non-overtime hours worked. Others allow the denominator to “float” upwards with additional hours worked, including in the numerator of the fraction the straight-time portion of overtime paid during the workweek.

Using a simple example, here’s how the dispute plays out. Assume the employee earns $1,000 a week plus a $100 education incentive, and works 48 hours in the week. What is the employee owed for the week?

Approach #1, Denominator Capped At Straight-Time Hours Worked:

$1,000 + $100
40
=
$27.50

Approach #2, Floating Denominator:

$1,000 + $100 + $200 (straight-time
component of 8 hours of Sat.)
48
=
$27.08

How do you know which approach to take with the denominator? Unfortunately, the results depend upon which theories courts in your area of the country follow. You should check with your local lawyer for advice on the issue.

Note: The principles in this article are derived from a lengthier treatment in Will Aitchison’s book, “The FLSA – A User’s Manual” available through www.LRIS.com.

The above article has appeared in a previous issue of Public Safety Labor News and has been reprinted courtesy of Labor Relations Information System. These articles are for informational purposes only.