Christopher Coyne, Senior Counsel in the Employment, Labor & Workforce Management practice, in the firm’s New York office, was quoted in SHRM, in “Understand the Regular Rate to Avoid Overtime Claims,” by Allen Smith. (Read the full version – subscription required.)
Following is an excerpt:
The definition of "regular rate" - a building block in calculating overtime for nonexempt employees - is technical, but understanding it can help prevent class actions and keep labor costs in check.
Before implementing any new compensation programs, HR professionals should consider the potential impact on the regular rate and resulting overtime rates, which can significantly increase labor costs, said Chris Coyne, an attorney with Epstein Becker Green in New York City. …
Determining how to calculate the regular rate and the forms of remuneration to include in the regular rate can be tricky, he added.
"The regular rate is the basis upon which an employee's overtime rate is calculated," Coyne said. The regular rate can vary week to week and may be impacted by generous compensation programs.
"As such, it must be a consideration when developing compensation systems, bonus programs, or employee incentive plans to ensure employers are accurately anticipating the impact and cost of these programs and are ready to implement any necessary changes in their payroll systems," he said." …
“All remuneration an employee receives must be included in the regular rate calculation, subject to an exhaustive list of statutory exceptions," Coyne emphasized. "In other words, if a payment does not fall within one of the enumerated categories specified in the act, it must be included in calculating the regular rate."
Employers should analyze remuneration carefully before excluding any form of payment from the regular rate, as the act requires meeting specific criteria before deeming any payment excludable, Coyne said.
"In some limited circumstances, premium rate payments provided by employers can not only be excluded from the regular rate but can also be used as an offset for the employer against overtime due," he added.
"Identifying these types of payments and properly accounting for these credits can provide significant savings for employers, yet this does not apply to all excluded payments - only those specifically identified in the statute."
