Jeffrey H. Ruzal, a Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s New York office, was quoted in SHRM.org, in “Anticipated ‘Regular Rate’ Rule May Clarify How to Calculate Overtime,” by Allen Smith.
Following is an excerpt:
Jeffrey Ruzal, an attorney with Epstein Becker Green in New York City, provided the following example of how the regular rate is used in the calculation of pay.
Suppose Mary earns $15 per hour, receives a $100 nondiscretionary bonus in the relevant workweek, and works 50 hours in that same workweek. To calculate the regular rate, the employer must first ascertain the total amount of earnings in that workweek by multiplying Mary’s $15 hourly rate by the total number of hours worked, or 50, which equals $750. Next, add to that subtotal the $100 nondiscretionary bonus, which equals $850. Divide $850 by the 50 hours worked to arrive at a $17 regular rate. Accordingly, Mary is entitled to $680 for her first 40 hours of work ($17 x 40 hours), plus $255 for her 10 overtime hours ($17 regular rate x 1.5 = $25.50, and $25.50 x 10 overtime hours = $255) for a total of $935.
DOL regulations identify only a few types of payments that may be excluded from the regular rate when calculating overtime, Ruzal explained. They include:
- Discretionary bonuses.
- Payments made when no work is performed, such as vacation or holiday pay.
- Irrevocable benefits payments.
- Premium payments for work performed outside an employee’s regular work hours.
- Extra compensation paid according to a private agreement or collective bargaining.
- Income derived from grants or options.