When Do I Have To Pay Overtime?
Question: I pay my employees on a piece rate, in other words, I pay them by the task as opposed to paying by the hour. Do I still have to account for their hours and pay overtime? And if I have to send an employee back out on a job to correct an error, do I have to pay him and does that time count toward overtime?
Answer: “Piece rate” pay is acceptable under the FLSA, with severable caveats. First, piece rate employees are hourly employees and thus must receive at least minimum wage for all hours worked, regardless of their level of productivity, and they must receive time and a half for hours over 40 in a work week. All their hours must be counted, even hours spent on a re-do.
To calculate overtime for piece rate workers, divide the total earnings in a week by the total hours worked in that week to determine what the FLSA refers to as the “regular rate of pay.” Overtime is computed as 1.5 times the regular rate of pay for hours in excess of 40. Here’s an example the Department of Labor gives:
Example: An employee paid on a piecework basis works 45 hours in a week and earns $405. The regular rate of pay for that week is $405 divided by 45, or $9.00 an hour. In addition to the straight-time pay, the employee is also entitled to $4.50 (half the regular rate) for each hour over 40 – an additional $22.50 for the 5 overtime hours – for a total of $427.50.
The DOL also allows overtime compensation for piece rate workers in this fashion:
Another way to compensate pieceworkers for overtime, if agreed to before the work is performed, is to pay one and one-half times the piece rate for each piece produced during the overtime hours. The piece rate must be the one actually paid during non-overtime hours and must be enough to yield at least the minimum wage per hour.
As can be seen, overtime has to be computed each week taking into account the employee’s piece work productivity.
With regard to paying an employee to fix an error, you must pay for the time, but you can pay at some lower rate than usual, even down to minimum wage, and to reiterate, that time will count toward determining whether overtime is owed. Also, bear in mind that in a week where the employee works over 40 and has more than one rate of pay, the overtime rate is derived from a regular rate of pay that is weighted between the regular rate of pay based on piece work and the other rate of pay for that week.
This response is intended for general informational purposes only and should not be construed as legal advice or a legal opinion, nor is this column a substitute for formal legal assistance. For help with particular legal needs, members are invited to consult with ACCA’s LegalTools Counsel, Brooke Duncan III of Adams and Reese LLP. Mr. Duncan can be reached at 504-585-0220 or by email at firstname.lastname@example.org.
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