Calculating Overtime Pay (Part II): “Reimbursements” May Increase Overtime

 In Employment Law, Overtime Law, Wage Law

Calculating Overtime Pay – “Reimbursements”

Under federal labor laws, workers are entitled to receive overtime pay of “time-and-a-half” for any overtime hours they work (i.e. hours over 40 in a week). Calculating overtime pay is based on the employee’s regular rate of pay. Sometimes, the overtime rate calculation is straightforward. For example, if an employee is paid $10 an hour, then the employee must be paid overtime at $15 per hour for all hours after 40.

Other times, calculating the overtime rate of pay is more complicated. For example, in the restaurant and hospitality industries, as discussed in Part I of this series (here), it is common for workers to receive tips and all or part of “mandatory gratuities” paid by customers. In some instances, tips are not included in the regular pay rate, but mandatory gratuities are. Thus, if an employee is paid $10 an hour, works 50 hours and receives $100 in mandatory gratuities, then the employee’s regular rate of pay is $12 an hour and the overtime rate is $18 per hour. That is based on 50 hours times $10 per hour ($500) plus the received gratuity ($100) divided by the total hours. That equals $12 an hour as the regular rate.

It is crucial for employees to have their overtime calculated correctly. Otherwise, the employer is stealing wages and violating both federal and state labor laws. If you think your employer is engaged in wage theft, seek counsel and advice from employee rights attorneys like the ones at Herrmann Law.

What About Other Payments?

Employees receive other payments from their employers like reimbursements or credits for buying worker-required clothing or equipment. Depending on the circumstances, those payments might have to be included when calculating the employee’s regular rate of pay and the overtime rate. Generally, if the payments are direct reimbursement — say, mileage for work-related travel — then the payments are NOT included in the calculation.

On the other hand, if the payments are not really reimbursements, then the payments must be included in calculating an employee’s overtime rate. Facts that indicate that payments are not really reimbursements include:

  • The amount of the “reimbursements” is always the same
  • Every employee receives the “reimbursements”
  • Employees do not need to submit any sort of paperwork or proof to receive the “reimbursements”
  • “Reimbursements” are given regardless of whether the employee engages in the behavior for which “reimbursements” are being provided
  • And more

An example comes from the case of Clarke v. AMN Services, LLC, Case No. 19-55784 (9th Cir. 2021), where the court found that supposed per diem “reimbursements” were actually wage payments that should have been included in the overtime pay rate calculations. That case involved nurses and medical technicians who worked various short-term assignments, many of which required local traveling to patient’s homes and group-living facilities. The nurses and technicians were paid weekly, paid by the hour and were also given a per diem “reimbursement” for meals, lodging, and incidentals. However, the “reimbursements” were given whether or not the nurse or technician actually traveled for work during the week and the “reimbursements” were the same regardless of how much traveling was actually done. That is, a traveling nurse or technician received seven days of per diem reimbursements even if they only worked five days. Based on these and other facts, the court concluded that the per diem reimbursements were really wages. As such, the weekly reimbursements should have been included in the employer’s calculations of the overtime pay rate.

Call the Employee Rights Attorneys at Herrmann Law Today

For more information, call the Employee Rights attorneys at Herrmann Law. If you think that your employer has violated your rights as an employee or engaged in wage theft, call us. We are proven, experienced, employee-focused attorneys representing workers across the United States in all types of workplace disputes. Use our Online Contact page or call us at (817) 479-9229.

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