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Paying nonexempt employees a salary? Be sure to get agreement on hourly rate

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in Human Resources,Overtime Labor Laws

The Fair Labor Standards Act (FLSA) requires that you pay employees 1.5 times their regular rate of pay for work over 40 hours per week.

Determining the amount of overtime pay first depends on identifying an em­­ployee’s hourly rate for the first 40 hours.

That can sometimes be more complicated than it sounds, especially for organizations that pay their hourly employees a set amount for their entire workweek, including overtime.

Employers that included overtime in the salary and don’t have an agreement on the regular hourly rate may end up owing additional money for overtime.

Recent case: Bao and two other employees of the Shang­hai Gourmet restaurant worked in nonexempt positions, but they were paid a set salary for all hours worked in a week, including overtime. They never ex­­plicitly agreed to a base hourly wage.

The three employees eventually sued, demanding overtime pay. The court required their employer to divide that set weekly salary by 40 to arrive at their base hourly rate.

Overtime then had to be calculated based on the number of hours eligible for overtime times 1.5. (Yang, et al., v. Shanghai Gourmet, No. 10-17830, 9th Cir., 2012)

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