Payroll on Bloomberg Tax is built to get you to the right answer faster and more efficiently. Get all the payroll intelligence you need with Bloomberg Tax expert analysis, perspectives and...
“You owe me overtime pay because the lump-sum miscellaneous payments didn't cover all the hours I worked,” Tiffany told her employer, Sam.
“We've paid you fairly for all the overtime you've worked,” Sam said. “Just because it's marked miscellaneous doesn't mean it's not for overtime.”
FACTS: A convenience store employee claimed her employer owed her overtime wages under the Fair Labor Standards Act for hours worked in excess of 40 in a week. Her regular rate of pay was $9, and her minimum overtime rate was $13.50.
The employer claimed that the employee was paid for all hours worked, including overtime, and that this was done through lump-sum payments, labeled as miscellaneous pay on her pay statements. The amount of miscellaneous pay would increase or decrease according to the number of hours worked, the employer said.
The employee claimed that under the FLSA, overtime pay could not be paid as a lump sum without regard to the number of hours worked. She also claimed the amount of miscellaneous pay was insufficient for the amount of overtime she worked and that it was based on a factor other than overtime worked.
ISSUE: Did the miscellaneous payments qualify as overtime pay?
DECISION: The lump-sum payments qualified as overtime compensation under the FLSA, and the employer did not owe the employee additional compensation, a federal district court ruled.
The regulation regarding lump-sum payment of overtime did not apply to the employer because the miscellaneous payments reflected different amounts of wages according to the amount of overtime worked.
According to Section 778.310 of the Code of Federal Regulations, “a premium in the form of a lump sum which is paid for work performed during overtime hours without regard to the numbers of overtime hours worked does not qualify as an overtime premium even though the amount of money may be equal to or great than the sum owed on a per hour basis.”
A convenience store worker claimed that the miscellaneous payments she received did not reflect her overtime hours.
The regulation applies only to lump-sum payments that do not change and is meant to prevent employers “desiring to pay an employee a fixed salary regardless of the number of hours worked in excess of the applicable maximum hours standard,” the court said.
For example, the court noted that the employer paid her $75 for five hours of overtime, instead of the required $67.40, and $144 for 10 hours of overtime, instead of the required $135.
Because the miscellaneous amount accurately reflected the overtime hours worked by the employee, the employer did not owe any additional overtime, the court said (Avorywoskie v. Kiana's Enterprise Inc, N.D. Ill., 13-cv-6062, 8/3/15).
POINTERS: Employers are required by the FLSA to pay covered employees time and one-half their regular rates for each hour or fraction thereof worked in excess of 40 during any given workweek. A workweek is a fixed and recurring period of 168 hours comprised of seven consecutive 24-hour periods. The Act does not require overtime pay for hours worked in excess of a daily maximum.
The FLSA sets the workweek as the basis for computing overtime, requiring an employer to pay an employee time and one-half for all work the employer “suffers or permits” to occur beyond 40 hours per week.
Employers generally are prohibited from deviating from the basic time and one-half standard for work above 40 hours per week.
Employers may not pay employees a standard lump sum that does not reflect the amount of overtime worked in a workweek.
However, special overtime rules permit an employer to credit certain daily and weekly premiums toward overtime under the FLSA.
In addition, a limited number of alternative overtime arrangements are available, such as time-off, prepayment, and “Belo” or guaranteed wage plans. Employers should note that significant restrictions apply to the use of these arrangements.
Section 778.310 prevents employers from using lump-sum overtime bonuses, which may result in employees being paid less than time and one-half for overtime hours.
For example, a private letter ruling from the Labor Department found that an employer could not provide a lump-sum overtime premium based on the volume of deliveries to induce employees to work overtime.
The employer paid a guaranteed salary of $600 per week for all hours worked, but offered a bonus to employees who made more deliveries and worked overtime. The bonus varied based on the volume of deliveries.
The department said the bonus scheme ran afoul of the FLSA because if an employer is going to pay overtime, that overtime needs to be calculated at a rate of one-and-a-half times the base salary.
In the case of the bonus, the overtime owed under the FLSA could be more than the bonus, thus denying the employee proper compensation.
For more information, see Payroll Administration Guide's “FLSA Overtime Compensation” chapter.
This analysis illustrates how courts resolve pay-related disputes. The names and dialogue are fictitious.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)