June 27, 2024

What You Pay & How You Pay – Comply with the FLSA

Two recent cases illustrate pitfalls employers should avoid when paying non-exempt employees.

Can I pay my non-exempt employee a flat daily rate of pay instead of an hourly rate? Yes. That’s what this employer did. But the problem was they failed to meet their minimum wage and overtime obligations and had to pay over $200K. If the employee works more than 40 hours in a workweek, you will need to calculate the employee’s hourly rate of pay for that workweek and then pay an additional half-time for the hours over 40 the employee worked in that workweek. Using this practice, the hourly rate is likely to fluctuate each week. EX: You pay an employee a daily rate of $80, assuming $10/hour for an 8-hour day. At the end of the week, you pay the employee a total of $400. The employee, however, worked a total of 45 hours. The employee’s hourly rate of pay for that workweek is $8.89 (400/45). Since you already paid the employee the hourly rate for the hours worked over 40, you now owe the employee the additional half time for the five hours worked over 40. If the employee works in a state with a minimum wage higher than $8.89, you may also have not met that state’s minimum wage requirement.

What about paying a non-exempt employee on a salary basis, can I properly do that
? Sure. That’s what this employer did. But they did not follow through on the rest and had to pay $307K. The same rule as above applies. You must ensure that the weekly salary you pay provides the employee with at least the mandatory minimum wage for every hour worked in that workweek, whichever is higher of federal or state, and you must still pay the additional half-time for hours worked over 40 in the workweek.

Click here
for some more practical examples from the U.S. Department of Labor.