Lump Sum Annual OT Payments and the FLSA

Today’s FLSA Question: I am a full-time paid firefighter that works a 24/48 schedule for an average of 56 hours per week. Historically, firefighters in our city received all of their FLSA overtime in one big check at the end of the year. The city maintained a running record of all the overtime pay firefighters were owed from scheduled work shifts throughout the year and issued a separate check at the end of the year. Most of us like receiving the overtime in one big check annually. It is a nice way to save a few thousand dollars. Last week, the city informed us it will be ending this practice and will begin paying all of our FLSA overtime every other pay check, or every 28 days. The city believes the end-of-year payment violates the FLSA. Does it?

Answer: The city is right on this one. Department of Labor (DOL) regulations found at 29 CFR §778.106 entitled Time of payment requires overtime be paid to employees in the paycheck for the workweek in which the overtime was worked. In the rare instance that the overtime cannot be calculated in the paycheck for the workweek in which the overtime was worked, the regulation requires payment to be as soon as “practicable.”

Here is the entire text from §778.106:

§ 778.106 Time of payment.

There is no requirement in the Act that overtime compensation be paid weekly. The general rule is that overtime compensation earned in a particular workweek must be paid on the regular pay day for the period in which such workweek ends. When the correct amount of overtime compensation cannot be determined until some time after the regular pay period, however, the requirements of the Act will be satisfied if the employer pays the excess overtime compensation as soon after the regular pay period as is practicable. Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment of the amount due and in no event may payment be delayed beyond the next payday after such computation can be made. Where retroactive wage increases are made, retroactive overtime compensation is due at the time the increase is paid, as discussed in § 778.303. For a discussion of overtime payments due because of increases by way of bonuses, see § 778.209.

In the scenario that you provided the city would be required to pay all overtime due as soon as “practicable” following the end of the firefighter’s work period. Here is an example:

• A city pays its firefighters weekly. However, the fire department has adopted a 28-day work period. Therefore, the amount of overtime owed to firefighters cannot be determined until the end of the 28-day work period. In most circumstances, these firefighters will only receive FLSA overtime every fourth paycheck.
• However, if the fire department has adopted a 14-day work period, the overtime would be theoretically paid every other paycheck.

It is also important to note that the FLSA is not the only law that the city should be concerned with in this situation. Most states also have rules related to payment of wages and overtime. These rules provide greater protections than required by the FLSA. In fact, some states make it a criminal offense for employers to withhold payment of wages beyond a specified time period. There is a good chance that your local state laws could be influencing the city’s decision as well.