Cinco de Mayo Alterations to Overtime Calculation Methods

Cinco de Mayo Alterations to Overtime Calculation Methods

Today a new US Department of Labor regulation goes into effect that dramatically changes the acceptable method of calculating overtime pay.  One of the strange quirks of the overtime law permits payment of half-time pay for overtime hours when an employer uses a fluctuating work week method of calculating pay.  Under this system, a salaried employee who is not exempt from overtime, and whose number of hours may fluctuate from week to week, may be paid half of the salary rate for the hours over forty.  This type of pay system is common with firefighters, for example, whose work weeks are not based on a normal 8 hour work day, five days a week, but rather change from week to week and include long stretches on the job.  The Department’s new rule provides that an employer may not use the fluctuating work week method if the employer gives bonuses or premium payment to the workers.

The premium payments often are offered for working unpopular shifts, such as overnight work or on major holidays.

The rule also clarifies certain rules for tipped employees.  Many tipped employees, such as wait staff, receive a very low minimum wage with the expectation that the tips will raise the individuals’ pay to at least the federal minimum wage.  An employer may pay as little as $2.13 per hour.  The regulations make clear that the employer may not use the tip credit unless the employee actually receives the tips used for the tip credit, and the tip credit may not be used where the employer keeps some of the tips.

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