Jeffrey Ruzal Quoted in "DOL: Designated Regular Rate for Overtime May Violate FLSA"

An employer should ensure that travel time is paid lawfully, even if it uses a pay method that is more complicated than paying a single hourly rate for all hours worked—including travel time—and paying overtime at 1.5 times that hourly rate, a recent Department of Labor (DOL) opinion letter suggested.

A compensation plan that paid an average hourly rate varying each week may not have complied with the Fair Labor Standards Act’s (FLSA’s) overtime requirements if the employer designated a set regular rate of pay for overtime and the actual regular rate exceeded that amount, the DOL stated in a Dec. 21 opinion letter. “Neither an employer nor an employee may arbitrarily choose the regular rate of pay; it is an ‘actual fact’ based on mathematical computation,” according to the opinion letter.

To calculate weekly pay, the employer in the opinion letter multiplied a home health aide services employee’s time with clients by his or her hourly pay rate for such work. The employer then divided the product by the employee’s total hours worked, which included the client time and the travel time between client locations during the workday. The employer guaranteed that the quotient met federal and state minimum-wage requirements. Furthermore, the employer noted that “a typical standard rate of pay is $10 per hour with a client including travel time” and that if any employee works more than 40 hours (total paid hours and travel time) in any given workweek, that employee would be paid time and a half for all time over 40 hours at a rate of $10.

The FLSA requires that nonexempt employees receive overtime of at least one and one-half times their regular rate of pay for time worked in excess of 40 hours per workweek. “The regular rate must be calculated by dividing the total weekly compensation by the total number of hours worked,” noted Jeffrey Ruzal, an attorney with Epstein Becker Green in New York City. If an employee’s actual calculated regular rate is $12 for a given workweek, then designating $10 as the regular rate would result in an underpayment in overtime, he said.