Overtime Exempt Battalion Chiefs, Flat Rate for Additional Hours Worked, and the FLSA

Today’s FLSA Question: I am an overtime exempt battalion chief for a full-time fire department. I do not receive any overtime pay for my scheduled work shifts or for required meetings or trainings. I receive extra pay for working additional hours on other shifts. For example, if one of the other two battalion chiefs is on vacation or takes a sick day, I will receive pay for filling in on that shift. However, my department doesn’t pay me by the hour for that work time. Instead, I receive a flat rate for working the extra shift. The rate works out to be slightly higher than my hourly rate, however it is far less than time and one-half of that rate. Does the FLSA allow the department to pay me a flat rate for working an entire 24-hour shift?

Answer: Good question. The FLSA allows employers pay exempt employees extra compensation in addition to their fixed salary without impacting the employee’s exempt status. This additional compensation can be paid in the form of a flat rate, hourly rate, bonus, or time and one-half. The rules related to compensation for overtime exempt employees are different than the general rules pertaining to overtime pay for first responders and other non-exempt overtime eligible employees.

The FLSA requires that non-exempt employees receive overtime pay for all hours worked over the statutory maximum every workweek or work period. The FLSA also requires the overtime rate to be at least time and one-half of the employee’s regular rate of pay. This is why proper calculation of an employee’s regular rate is so important. However, the FLSA contains no such requirements for overtime exempt executive employees.

In fact, there is no FLSA requirement to pay you [at all – never mind at an overtime rate] for working additional shifts. This may seem overly harsh, but employers do not have to pay exempt executive employees’ overtime or even straight-time pay for working additional hours beyond the normal workweek. However, Department of Labor (DOL) regulations allow employers to provide exempt employees additional compensation for hours “worked for work beyond the normal workweek.” This additional compensation can be paid “on any basis.”

Here is the full text of that regulation:

§ 541.604 Minimum guarantee plus extras.

(a) An employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount paid on a salary basis. Thus, for example, an exempt employee guaranteed at least $684 each week paid on a salary basis may also receive additional compensation of a one percent commission on sales. An exempt employee also may receive a percentage of the sales or profits of the employer if the employment arrangement also includes a guarantee of at least $684 each week paid on a salary basis. Similarly, the exemption is not lost if an exempt employee who is guaranteed at least $684 each week paid on a salary basis also receives additional compensation based on hours worked for work beyond the normal workweek. Such additional compensation may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off.

(b) An exempt employee’s earnings may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned. The reasonable relationship test will be met if the weekly guarantee is roughly equivalent to the employee’s usual earnings at the assigned hourly, daily or shift rate for the employee’s normal scheduled workweek. Thus, for example, an exempt employee guaranteed compensation of at least $725 for any week in which the employee performs any work, and who normally works four or five shifts each week, may be paid $210 per shift without violating the $684-per-week salary basis requirement. The reasonable relationship requirement applies only if the employee’s pay is computed on an hourly, daily or shift basis. It does not apply, for example, to an exempt store manager paid a guaranteed salary per week that exceeds the current salary level who also receives a commission of one-half percent of all sales in the store or five percent of the store’s profits, which in some weeks may total as much as, or even more than, the guaranteed salary.