Calculating Overtime for Employee with Two Different Pay Rates
A restaurant employee works in two different job categories – as kitchen help for above the minimum wage and as waitstaff for $2.13 per hour plus tips, for example – and the employee works less than 40 hours in each job. However, the employee works over 40 hours for the two jobs combined. Is this employee entitled to overtime pay and, if so, for which job?
The Fair Labor Standards Act (FLSA) and parallel state laws require that non-exempt employees receive overtime pay for all hours worked in excess of forty (40) hours in any one workweek. Even if an employee is performing two different kinds of work with different pay rates, all hours worked must be combined for overtime pay purposes. That means the hours worked by your employee as kitchen help must be combined with the hours worked by your employee as waitstaff to determine if the 40-hour threshold for overtime pay is exceeded in any particular workweek. If so, the employee is entitled to overtime pay in that workweek, at one and one-half times the employee’s regular rate of pay, for all hours worked in excess of forty (40) hours.
That leaves the question of how to calculate overtime, given that the employee is paid at two different pay rates for the different jobs. The FLSA provides that, when an employee works at two or more different jobs paid at different non-overtime rates (of not less than the applicable minimum wage) in a workweek, the employee’s regular rate of pay for the week is the weighted average of the rates. That is, the employee’s total earnings for the workweek from all the rates are divided by the total number of hours worked at all the jobs to determine the regular rate of pay for overtime.
A few words of caution. First, keep in mind that the regular rate of pay for a tipped employee cannot be less than the amount of direct cash wages paid plus the tip credit claimed. In other words, when an employer takes a tip credit, overtime must be calculated based on the full minimum wage, which is currently $7.25 an hour, not the lower direct (or cash) wage payment. Second, state minimum wage and overtime laws may vary. Employers must remember to verify the state law where they have employees and pay employees according to whichever law – state or federal – that provides the greater benefit to the employee.
This article, slightly modified to note recent updates, was featured online in the Wisconsin Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.
