Don’t Count Holiday Pay in Regular Rate (and Other FLSA Oddities)

Wage and Hour
by Stephen Bruce, PhD, PHR
"In yesterday’s Advisor, Attorney Ted Boehm offered tips for handling tricky wage and hour challenges. Today, he provides his take on deduction difficulties, plus an introduction to the wage and hour self-audit guide that help you find violations before the feds do."

Boehm, an associate in the Atlanta office of law firm Fisher & Phillips, LLP, offered his tips at a recent webinar sponsored by BLR® and HR Hero®.

Premium Pay for Holidays and the Regular Rate

Under Section 7(e)(6) of the Family Labor Standards Act (FLSA), premium pay for work by a nonexempt employee on a holiday is not considered part of his or her regular rate of pay for overtime purposes if the premium pay is at least one and one-half times his or her normal hourly rate of pay. For example, if the employer offers double pay for holiday, that premium won’t be included in the regular rate.

In fact, premium pay for holiday can actually be used by an employer as a “credit” towards any OT that might be due that particular workweek.

However, there are reasons you may not want to take the “credit.” If you tell the employee you are going to pay double time for the holiday, and then you take a credit against other overtime, the employee will likely feel taken advantage of, and will be less likely to volunteer for holiday work.

So, most employers don’t take advantage of this credit.

Are class action lawyers peering at your comp practices? It’s likely, but you can keep them at bay by finding and eliminating any wage and hour violations yourself. Our editors recommend BLR’s easy-to-use FLSA Wage & Hour Self-Audit Guide. Try it for 30 days … on us.

Deductions Can’t Cut into Overtime

Most deductions or payments cannot “cut into” overtime. For example:

Bob is paid at an hourly rate of $8.25 an hour. One day, he carelessly breaks a $75 tool. Bob feels terrible about this and tells his supervisor that he will write a check for $75 once he gets his pay for the week. Bob works 48 hours that work- week.

The most Bob’s employer can deduct or accept from Bob (courts will consider those situations the same, Boehm says) under the FLSA is: [($8.25-$7.25) x 40 hrs.] = $40, that is, the difference between regular wage amount and the minimum wage amount for the initial 40 hours.

For his overtime work, under the FLSA, Bob must be paid the full amount: [($8.25 x 1.5) x 8 OT hrs.] = $99. The employer cannot cut into that overtime.

To see how this works, take Bob’s total pay of $429. You can’t cut into the amount due from minimum wage for 40 hours ($290), and you can’t cut into the overtime amount ($99). That leaves the remaining amount that can be deducted, $40.

Good Recordkeeping Is Essential

Recordkeeping is essential for the defense of a lawsuit. If you have no time records, there’s a very slim chance of prevailing, says Boehm.

Famous Last Words …

Don’t fall for “conventional wisdom,” says Boehm.

  • “Everybody I know of pays this way.”
  • “Salaried people don’t have to be paid overtime.”
  • “This is what our employees want us to do.”
  • “The employee agreed to this.”
  • “We’re too small for anyone to sue us.”

Ignore these myths or heed them at your peril, says Boehm.

Wage and hour should be simple, but it’s just not. What’s the regular rate? Are managers allowing off-the-clock work? (Or worse, demanding it?) And then there’s the issue of mobile devices after hours—the list of ways you can get into trouble seems endless. How do you really know if your managers and supervisors are following your guidelines? There’s only one way to find out what sort of compensation shenanigans are going on—regular audits.

To accomplish a successful audit, BLR’s editors recommend a unique checklist-based  program called the Wage & Hour Self-Audit Guide. Why are checklists so great? Because they’re completely impersonal, and they force you to jump through all the necessary hoops, one by one. They also ensure consistency in how operations are conducted. And that’s vital in compensation, where it’s all too easy to land in court if you discriminate in how you treat one employee over another.

Experts say that it’s always better to do your own audit and fix what needs fixing before authorities do their audit. Most employers agree, but they get bogged down in how to start, and in the end, they do nothing. There are, however, aids to making the Fair Labor Standards Act (FLSA) self-auditing relatively easy.

What our editors strongly recommend is BLR’s Wage & Hour Self-Audit Guide. It is both effective and easy to use, and it even won an award for those features. Here’s what customers like about it:

  • Plain English. Drawing on 30 years of experience in creating plain-English compliance guides, our editors have translated FLSA’s endless legalese into understandable terms.
  • Step-by-step. The book begins with a clear narrative of what the FLSA is all about. That’s followed by a series of checklists that utilize a simple question-and-answer pattern about employee duties to find the appropriate classification.

All you need to avoid exempt/nonexempt classification and overtime errors, now in BLR’s award-winning FLSA Wage & Hour Self-Audit Guide. Find out more.

  • Complete. Many self-audit programs focus on determining exempt/nonexempt status. BLR’s also adds checklists on your policies and procedures and includes questioning such practices as whether your break time and travel time are properly accounted for. Nothing falls through the cracks because the cracks are covered.
  • Convenient. Our personal favorite feature: A list of common job titles marked “E” or “NE” for exempt/nonexempt status. It’s a huge work saver.
  • Up to Date. If you are using an old self-auditing program, you could be in for trouble. Substantial revisions in the FLSA went into effect in 2004. Anything written before that date is hopelessly—and expensively—obsolete. BLR’s Wage & Hour Self-Audit Guide includes all the changes.

You can examine BLR’s Wage & Hour Self-Audit Guide for up to 30 days at no cost or obligation. Go here and we’ll be glad to arrange it. 

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  1. Barb        
    May 7, 2013 11:05 am

    I would hope most employers wouldn’t even accept Bob’s offer to reimburse for an accidentally broken tool. It could hurt morale and give the impression that you EXPECT employees to make such reimbursements. The potential trouble doesn’t seem worth it.