Before you approve a creative approach to paying hourly employees, be sure to get expert help. That’s essential if your employees may have to put in more than 40 hours of work per week, because you will have to calculate their regular rate of pay to calculate overtime compensation. And that’s something the Department of Labor wants done right.
Recent case: Gilbert and several other waste and recycling truck drivers sued their employer for overtime pay.
The employer used a complicated payment method. For the first five days of work, employees received $120 per day, plus $10 each day for showing up. On the sixth day, they received an hourly rate based on a trailing 13-week hourly average earned. Overtime was then calculated by adding up those totals and dividing by the number of hours worked that week. Any hours over 40 were then paid at half that rate.
The court nixed this method because employers can’t pay a different base rate for additional work that is identical to regular work. Employers can only use a different rate for substantially different work. (Rodriguez v. BFI Waste, et al., No. 5:13-CV-00020, WD TX, 2013)
Final note: The DOL takes overtime payments very seriously. You must determine the employee’s regular rate of pay based on DOL guidelines before calculating the extra hours at 1.5 times that rate.
Many states have even stricter rules on when and how overtime is paid.