November 17, 2008
US Department of Labor Issues Opinion Letter on Overtime, On-call Hours
Filed under: News
Vision Payroll

The US Department of Labor recently issued Administrator signed Opinion Letter FLSA2008-6. Although Opinion Letters only apply to the exact set of facts and circumstances presented in each case, they are a valuable aid in understanding current interpretations of the Fair Labor Standards Act (FLSA). This Opinion Letter discusses whether a city that employs workers in a Water Treatment Plant may include on-call compensation received in a two-week pay period with other pay received in a two-week pay period for purposes of computing the overtime rate of pay to be applied to that period. An employee is paid $2.50 per hour for on-call time that is not considered hours worked under the FLSA. The employee may work overtime during only one week of two-week period. The city proposed including the on-call compensation with all other compensation received in the two-week pay period and dividing by the number of hours worked in that pay period to arrive at a regular rate of pay. For example, an employee earns $10 per hour, works forty hours in the first week and forty-five hours in the second week of a two-week pay period and also receives $100 of on-call compensation. The city proposed paying overtime based on a regular rate of $11.18 per hour. (40 hours X $10/hour) + (45 hours X $10/hour) + $100 = $950 total compensation. $950/85 hours = $11.18 per hour regular rate of pay for overtime purposes. The overtime premium under this method would be $27.95 or $11.18/hour X 5 hours X0.5 premium. If a one-week pay period were used, a regular rate of $12.22 would be used for the overtime calculation (45 hours X $10/hour) + $100 = $550 total compensation and $550/45 hours = $12.22 per hour. The overtime premium under this method would be $30.55 or $12.22/hour X 5 hours X0.5 premium. The FLSA uses a standard of a single workweek for calculating the regular rate of pay and does not allow averaging over two weeks even if the employee’s pay period is normally two weeks. Since “the specific hours for which on-call pay was earned are identifiable, the payment for on-call time must be attributed to the workweek in which the on-call hours occurred.” Therefore, the city must use the latter method to calculate the employee’s regular rate of pay and may not use a two-week period. State laws may provide rules that are more beneficial to the employee and must be followed. Contact Vision Payroll if you have questions about this Opinion Letter.


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