The Fair Labor Standards Act (FLSA) dates back to 1938. Workplaces have changed drastically since that time. Many of the most common FLSA violations reflect that transition. Modern technology has transformed the workplace in ways the original framers of the FLSA could not have imagined. As an employer, it is not always easy to stay ahead of the curve on some these issues. It is essential that employers remain vigilant in efforts to stay compliant with the FLSA. This is the second of a five-part series outlining 5 very common FLSA violations and providing tips on how to stay out of the Courtroom.
- Employee Misclassification – Exempt vs. Non-Exempt (Part 1)
- Calculating Regular Rate Incorrectly (Part 2)
- Failing to Keep Proper Records (Part 3)
- Failing to Pay Employees for all Hours Worked (Part 4)
- State Law Issues (Part 5)
Calculating Regular Rate – Effects of Wage Augments
Properly calculating an employee’s regular rate is an extremely important task. The regular rate is the rate that all FLSA overtime is based upon. If the regular rate is not calculated correctly, an employee could receive less overtime pay than mandated by law. The employer may not only be liable for paying these backed wages, they may also be liable for paying both liquidated damages and attorney’s fees. Properly calculating any employees regular rate can be challenging. Properly calculating a firefighter’s regular rate can be down-right stressful!
The FLSA defines the regular rate as “deemed to include all remuneration for employment” with some exceptions. (See 29 USC 207(e)(1-8) for a full list of exceptions.) The general rule is that all the money paid to an employee for their work must be included in the regular rate. If the employer wants to exclude any money from the regular rate, the employer must prove that money falls squarely within one of the eight exceptions.
Whether the employee is paid by the hour, week, day, or even by the task (piecework), the employer must calculate the regular rate. One of the reasons why calculating the regular rate for firefighters can be so difficult is due to the way many firefighters are paid. Very often a firefighter will receive a set “base” rate, but then also receive additional wages for a variety of different assignments or qualifications. These additional wages could be paid hourly, by the shift, week, or even annually. Incorporating these different type of wage augments in the regular rate create real world challenges that fire department administrators must solve.
Some wage augments can be excluded from the regular rate. For example, money the employer pays for the employee’s health and life insurance, vacation pay, discretionary bonuses, and pension contributions typically do not have to be included in the regular rate. However, money the employer pays for longevity bonuses, acting out of rank, extra money for certifications, degrees, etc. should be included in the regular rate. However, not all wage augments are as black and white.
- Does your organization provide money to firefighters in lieu of accepting medical benefits? The DOL and a recent federal circuit court have mandated that money must be included in the employee’s regular rate.
- How does your organization provide holiday pay to its firefighters? If the firefighters receive the same identical lump sum holiday pay whether they work the holiday or not, that may need to be included in the regular rate. If the firefighter receives time and half (premium pay) for working the holiday, that premium pay can be excluded from the regular rate.
- Should your firefighters uniform allowance be included in the regular rate? That depends. Is it excessive? If the uniform allowance is determined to be excessive, it would most likely need to be included in the regular rate.
Correctly calculating the regular rate for a firefighter is a very fact specific process.
When calculating the regular rate remember the general rule; all money paid to an employee for work must be included in the regular rate unless it meets one of the exceptions, and the employer bears the burden of showing the exception should apply. Employers should carefully evaluate each wage augment before excluding it from the regular rate. There are many more wage augments or incentives that your firefighters may receive, it would be impossible to discuss all of them here. The best way to calculate the regular rate correctly is to frequently perform regular rate audits and seek the advice of competent legal counsel when in doubt. Remember regular audits will help to minimize any potential damages but will not serve as a defense or excuse if there is an error.