As discussed in prior articles, the federal Fair Labor Standards Act (FLSA) requires workers to pay time and a half for any hours worked past forty in a workweek. Many Louisiana employers, particularly in the oil and gas industry, pay workers a flat daily rate, no matter how many hours they actually work. Employers may prefer day rates because it simplifies employee timekeeping and payroll. However, paying a day rate does not excuse companies from the overtime requirements of the FLSA. Employees who are paid by the day must be paid overtime whenever they work more than forty hours in a workweek.
If an employee works forty or fewer hours in a week, the FLSA does not come into play (so long as the worker receives at least minimum wage). However, as soon as the employee works more than forty hours, the employer must calculate and pay overtime premiums – usually one and a half times his regular hourly rate. A worker on a day rate does not have a set “hourly rate,” so the federal regulations explain how overtime must be calculated for these individuals:
[The employee’s] regular rate is determined totaling all the sums received at such day rates or job rates in the workweek and dividing by the total hours actually worked. He is then entitled to extra half-time pay at this rate for all hours worked in excess of 40 in the workweek.
The employee’s regular rate therefore depends on the number of hours he works in that particular week. The employer must re-run this calculation on a weekly basis, as the regular rate will vary from week to week. An employer cannot base this calculation on the number of hours worked over a two-week pay period — it is the workweek, not the pay period, that matters.
In order to accurately perform this calculation, employers must track employees’ time. If an employer does not track time, it cannot determine whether any particular employee is owed overtime for that week, and if so how much. (At this point, employers may be wondering whether it is worth it to pay day rates in the first place, as it does not excuse them from their obligations to pay overtime and track employee time.)
Many employers have been successfully sued for failing to pay overtime premiums to day rate workers. The unpaid wages are often significant, as the FLSA allows employees to sue for up to three years’ of back wages, and includes statutory penalties which can double the amount owed. It is not a defense to an FLSA claim to say that the employee “knew what the deal was” or “never complained about overtime.” An employer’ overtime obligations are set by law and cannot be waived or contradicted by company policy.
If you have any questions about how to pay overtime to day rate employees, or if you have not been paid overtime based on a day rate pay plan, call me today at (504) 267-0777 or email me at this link.