The DOL issued an opinion letter approving a pay model where an employer in the home health field payed its employees at an hourly rate for time spent with patients without additional hourly pay for time spent by the employees traveling to and from patient homes. In that same letter, the DOL provided guidance on how that employer should calculate its employees’ overtime rates. The DOL opinion letter provides employers who pay non-exempt employees using certain methods other than the traditional straight hourly rate across all hours worked method reassurance that their pay model complies with the FLSA, and provides them with guidance about how to calculate overtime rates for such employees.
While many employers pay their employees at a single hourly rate for all hours worked, in some industries, other pay models make more sense. For instance, some employers in the home health field pay their workers based on the services they provided to patients with the intention of having that pay compensate their employees for all their work time, including time spent traveling to and from patient homes.
One such employer from the home health field asked the DOL whether its pay model complied with the FLSA. That employer paid its employees at an hourly rate for time spent in patient homes. It did not provide its employees additional pay for time spent traveling to and from patient homes. But because such travel time is work time under the FLSA, the employer took hourly earnings divided by total time worked, both in patient homes and in transit to patient homes, to ensure that it paid each of its employees at least the minimum wage for all of those hours. The DOL found that this complied with the FLSA’s minimum wage requirements.
To calculate overtime, the employer assumed that its employees earned an average of $10 per hour when their pay was divided by all hours worked and paid their employees time and a half based on that rate. The DOL found that, in assuming it paid all of its employees at a $10 per hour regular rate, the employer could have violated the FLSA’s overtime provision if any employees earned more than $10 per hour. Instead, the employer should have divided each employee’s base pay by the total number of hours worked, including travel time, to calculate the regular rate.
While addressing one particular pay model, the DOL’s opinion letter provides useful guidance for employers who use other pay models, such as commission or piece rate pay models without base hourly pay, on how to calculate overtime rates as well as reassurance that such pay models comply with the FLSA.