The New Jersey Employment Law Firm Blog
Federal and New Jersey wage and hour laws require employers to pay overtime rates to their non-exempt employees for any time they spend working over forty hours in a week. The amount of overtime pay is based on the employee’s “regular rate” of pay. Under federal law, some payments and perks are not included in employees’ regular rate for the purpose of calculating overtime pay. The U.S. Department of Labor (DOL) issued updated rules clarifying what is included in and excluded from an employee’s regular rate. They took effect in January 2020. The purpose of these updates, according to the DOL, is to “encourage employers to provide additional and innovative benefits” to their employees while complying with federal overtime law. 84 Fed. Reg. 68736 (Dec. 16, 2019). Employees should also be aware of what is counted in their regular rate of pay.
Overtime Rate of Pay
The federal Fair Labor Standards Act (FLSA) states that employers must pay overtime to non-exempt workers for time spent working in excess of forty hours in a week. 29 U.S.C. § 207(a). The statute sets the overtime rate at one-and-a-half times an employee’s “regular rate.” An employee with a regular hourly rate of $15 per hour would therefore be entitled to $22.50 per hour for overtime work.
Exclusions from “Regular Rate”
An employee’s regular rate, according to the FLSA, is anything paid to the employee that is not specifically excluded by the statute. Exclusions include various payments and other things of value provided to employees. Some exclusions do not provide any credits to offset an employer’s responsibility to pay overtime:
– Bonuses for special occasions, such as Christmas bonuses, that are not tied to performance in any way;
– Payments for periods when the employee is not working, such as vacation or sick time;
– Additional payments made in the employer’s sole discretion, not as part of an employment contract, “in recognition of services performed during a given period”;
– Employer contributions to a retirement plan, health insurance policy, or other benefit; or
– The value or income from a stock option or stock appreciation plan.
Id. at §§ 207(e)(1) – (4), (8).
Credits Towards Overtime Pay
Three exclusions under the FLSA count as credits towards an employer’s obligation to pay overtime:
– Additional compensation, at a higher rate, for working more than eight hours in a day or more than the “maximum workweek”;
– Extra pay, at the overtime rate or higher, for working on an employee’s days off, including weekends, holidays, or days in excess of five in a week; and
– Additional pay at a higher rate for extra work as part of an employment contract or collective bargaining agreement.
Id. at §§ 207(e)(5) – (7), (h).
The Updated DOL Rule
The DOL’s new rule goes into voluminous detail about the FLSA’s regular rate exceptions. The rule updates the DOL’s overtime regulations, found in 29 C.F.R. Part 778, to add clarifications about those exceptions. A major theme of the new rule is that bonuses and other payments are excluded if they are not linked to “the quantity or quality of work performed.” 84 Fed. Reg. at 68745, 68748.
An employee who is involved in a dispute with their employer in New Jersey or New York can be in a very difficult position. They need a skilled advocate on their side to guide them through the legal process and fight for their rights. The Resnick Law Group’s wage and hour attorneys are available to discuss your case today. Please contact us at 973-781-1204, at 646-867-7997, or online to schedule a confidential consultation.