Two Hourly Rates, Same Work Period, and the Regular Rate

Today’s FLSA Question: I am the finance manager responsible for our fire department’s payroll. Our firefighters receive higher hourly rates when working in a higher rank. For example, last week a firefighter worked 24 hours as a firefighter and another 48 hours as a lieutenant. How can I calculate a firefighter’s regular rate when he or she is paid two different hourly rates in the same work period?

First, proper calculation of the regular rate is critical. All FLSA overtime must be at least time and one-half of the regular rate. Second, calculating an employee’s regular rate can be one of the most challenging and important functions for any manager. The United States Supreme Court has even written calculating an employee’s regular rate can be “perplexing.” Additionally, as most fire department administrators responsible for calculating the regular rate for firefighters will attest—this process can be down-right stressful!

Despite all of this, the answer to your question is rather straightforward. Notice, I did not write easy . . . Just straightforward. . .

The FLSA and Department of Labor (DOL) regulations contain two options for calculating the regular rate for employees that earn different hourly rates in the same work period. The first and most popular is often referred to as the blended or weighted average regular rate calculation. Department of Labor regulations found at 29 C.F.R. §778.115 provide the methodology for making this calculation.

Employees working at two or more rates.

Where an employee in a single workweek works at two or more different types of work for which different nonovertime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates. That is, his total earnings (except statutory exclusions) are computed to include his compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs. . .

For example:

• Firefighter A earns $20 per hour working as a firefighter and $30 per hour working (out-of-rank) as a lieutenant.
• FF A works 24 hours as a firefighter and another 48 hours as lieutenant in the same 7-day work period.
• The weighted average regular rate for the work period is $26.67 per hour.
  • Total wages for the work period ($20*24hrs. + $30*48hrs.) – divided by –
  • Total hours worked in the work period (72hrs.)

The second method of calculating the regular rate for employees that earn different hourly rates in the same work period is found within the FLSA itself. It can be found at 29 U.S.C. §207(g)(2). Many collective bargaining agreements contain provisions, often referred to as 7(g) agreements, that allow for this method. Here is how 7(g) agreements work.

First, the firefighter must perform two or more kinds of work for which different hourly . . . rates have been established in the same work period. Second, in lieu of utilizing the blended or weighted average to determine the regular rate, the employer and employee can agree to utilize the bona fide hourly rate earned during overtime hours as the regular rate for FLSA overtime purposes. Here is an example:

• Firefighter A earns $20 per hour working as a firefighter and $30 per hour working (out-of-rank) as a lieutenant.
• FF A works 24 hours as a firefighter and another 48 hours as lieutenant in the same 7-day work period.
• FF A’s regular rate while working as a firefighter is $20 per hour.
  • Overtime rate while working as a firefighter will be based on $20/ hour regular rate.
• FF A’s regular rate while working as lieutenant is $30 per hour.
  • Overtime rate while working as a lieutenant will be based on $30/hour regular rate.

While this second, less popular 7(g) method of calculating the regular rate may seem easier, especially for mathematically challenged folks—myself included—there is a catch. Employers must insure they are paying overtime based on the hourly rate for the type of work the employee is performing during overtime hours. To again utilize the above example, if a firefighter is working as a lieutenant from hours 53 to 72 in a 7-day work period, the firefighter’s overtime rate will be based upon the lieutenant’s regular rate, not the blended rate, nor the firefighter’s regular rate. Section 7(g) agreements may make calculating overtime easier, however as we see, it also may result in higher overtime costs.

So, to get back to your question. The most common way to calculate the regular rate for a firefighter earning more than one hourly rate in the same work period is to determine the blended or weighted average. However, if you can meet the requirements of §207(g) you can calculate the regular rate off of the work they are performing at that particular time. If you are considering utilizing a 7(g) agreement you should consult a local FLSA attorney to insure you are paying the proper overtime.