The Fair Labor Standards Act requires that overtime compensation be paid at a rate of not less than one-and-a-half times the regular rate of pay of all hours worked in excess of 40 during a particular workweek. Recently, the Department of Labor’s Wage and Hour Division responded to a request for an opinion on whether compensation for “on-call” time in a specific week may be averaged over a two week pay period for purposes of computing the regular rate of pay on which employees’ overtime wages were based during the entire pay period. In response, the DOL informed the employer that an employee’s regular rate of pay must be computed on a workweek basis, and that payment for on-call time must be attributed to the specific workweek that included the on-call assignment. Wage and Hour Opinion Letter, FLSA 2008-6, 9/22/08 (released 11/14/08).
DOL regulations generally require that overtime pay be based upon the average hourly wage earned during a single workweek. The calculation is done by first determining the “regular rate of pay” for the employee. That is done by determining the total wages earned during a workweek, and dividing that number by the hours actually worked. The resulting figure is the regular rate of pay earned by the individual during that workweek. Overtime pay is then calculated by multiplying that number by 1.5 (to determine overtime rate of pay), and then multiplying that figure by the actual number of overtime hours worked.
In this case, employees at a city’s water treatment plant are asked to be on call during one week each month. In addition to an hourly wage for hours worked, they are paid $2.50 for each on-call hour. During that on-call time, they are required to wear a pager and to respond within 30 minutes to any work-related emergency. However, according to the city, employees rarely are called back to work and often go months without having to report for duty during an on-call period. The city recognizes that on-call pay must be included in computing the regular rate of pay for employees’ overtime calculations, but wants to spread the on-call pay across the two-week pay period within which the on-call compensation is received. The DOL states that such calculation would not be consistent with its regulations and that instead, the on-call compensation must be attributed to the specific workweek in which the on-call hours occurred.
An employee who is not required to remain on the employer’s premises, and is simply required to be available during a certain time period is not “working” while on call. Therefore, those hours generally are not calculated in the number of hours worked to reach the 40-hour threshold for overtime. The payment received for that period of time, however, is paid as compensation. Therefore, that amount must be calculated as part of an individual’s “regular rate of pay” for purposes of overtime calculations.
The DOL’s opinion letter includes an example: if an employee earning $10 per hour works 40 hours in workweek one of a two-week pay period and works 45 hours at $10 per hour and in addition to his 40-hour wage earns $100 of on-call compensation in workweek two, the regular rate of pay would be calculated separately for workweeks one and two. The additional on-call pay would raise the employee’s regular rate of pay for workweek two. That higher regular rate would also form the basis of the overtime pay for the 5 overtime hours worked during that week, resulting in a higher overtime pay than if the employer had spread the on-call pay over the entire two week calculation of “regular rate of pay.”
As set forth in this opinion letter, an employee’s regular rate of pay must be computed on a workweek basis, and payment for on-call time must be attributed to the week in which the on-call time actually occurred. Any other method of calculation will violate DOL regulations that guide overtime pay.
