February 21, 2023

Daily Pay Might Not be the Way…to FLSA Compliance

For the second time in one week, the issue of daily pay rates makes the news. On February 21st, the U.S. Department of Labor (DOL) reported that an employer improperly paid 69 employees a daily rate of pay. The daily rate failed to provide each employee with at least minimum wage when divided by the number of hours each worked per day, as well as overtime for the week.  The DOL also found the employer failed to maintain a record of all hours actually worked.

The next day brought the story of the U.S. Supreme Court’s ruling. An employee who was paid a daily rate of pay and who earned more than $200,000 per year was improperly classified as exempt and was owed overtime for all the hours he had worked over 40 in a work week.

Lessons Learned? The Fair Labor Standards Act gives employers flexibility in how they pay non-exempt employees, such as on an hourly, daily, piece-rate, salary, commission, or other basis.  If you pay your non-exempt employees by any manner other than an hourly rate, conduct periodic audits. Divide the total weekly compensation by the total hours worked and ensure you have paid at least minimum wage for all hours worked, plus overtime for all hours worked over 40 in the workweek.

Overtime tip. Remember that overtime must be 1.5 times the employee’s regular rate of pay, which may be different from the employee’s hourly rate of pay. If you pay by any method other than hourly, the employee’s regular rate of pay likely varies from day to day and/or week to week.  Also include in your calculations any supplemental wage payments such as show, callback or on-call pay, shift or weekend differentials.

Don’t forget your state laws.  At least 31 states require a minimum wage that is higher than the federal.

Expect the scrutiny to continue.  The news abounds with reports of “wage theft” and measures to combat it. In a recent speech, President Biden praised his nominee for Secretary of Labor Julie Su for having “cracked down on wage theft.” The Manhattan District Attorney recently announced his office is establishing a “Stolen Wage Fund” and will hold employers and individual executives and managers accountable.