Admittedly, I’m a little late blogging about this one…not sure how it escaped me. It is slightly old news, but important for home health care providers or other employers who use varying average hourly rates. The Department of Labor (DOL) issued an opinion letter on December 21, 2018 regarding the determination of minimum wage and overtime compliance with the Fair Labor Standards Act (FLSA) for employees with varying average hourly rates. Specifically, the letter concerns an employer who provides in-home health care services. The FLSA mandates employers provided all covered, nonexempt employees at least the federal minimum wage for all hours worked and overtime compensation for all hours worked in excess of 40 hours per week.
Home health care workers may be required to travel between clients’ homes during the workday. In this case, the employer calculated employees’ weekly pay by multiplying the employee’s time with clients by his or her hourly rate, and then dividing the total by the employee’s total hours worked (including time with the client and travel time). The employer compared the resulting number to federal and state minimum wage rate requirements to confirm compliance.
The DOL has previously opined an employer complies with the FLSA “[i]f the employee’s total wages for the workweek divided by compensable hours equal or exceed the applicable minimum wage.” Thus, even though the employees’ hourly rates varied each week, because the employer ensured that the average hourly pay rate always exceeded the FLSA’s minimum wage requirements for all hours worked, the DOL found the employer’s compensation plan complied with the FLSA’s minimum wage requirements.
However, the DOL remarked that the employer’s compensation plan might not comply with the FLSA’s overtime requirements. Under the FLSA, nonexempt employees must receive overtime compensation, at a minimum of one and one-half times their regular rate of pay, for all hours worked over 40 hours per week. The employer in this situation assumed a regular rate of pay of $10 per hour when calculating overtime. The DOL opined that this may violate the overtime requirements for employees whose actually regular rate of pay is greater than $10 per hour because, “neither an employer nor an employee may arbitrarily choose the regular rate of pay; it is an ‘actual fact’ based on ‘mathematical computation’.” However, if the employees’ actual regular rate of pay were less than $10 per hour the compensation plan would not violate the FLSA’s overtime requirements because an employer has the discretion to pay overtime in excess of the FLSA’s requirements. As with all opinion letters it is important to remember that they are fact specific to an individual employer. However, they serve as a general guidance for all employers in similar situations.