Wage and Hour Division, Labor § 548.501
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Wage and Hour Division, Labor § 548.501 § 548.405 Representative period. ers, hourly rated employees, and sala- (a) The application must set forth ried employees are the same as the the facts relied upon to show that the methods of computing overtime pay at established basic rate is substantially the regular rate. equivalent to the average hourly earn- Example 1. Under an employment agree- ings of the employee exclusive of over- ment the basic rate to be used in computing time premiums over a representative overtime compensation for a piece worker period of time. 21 The basic rate will be for hours of work in excess of 8 in each day considered ‘‘substantially equivalent’’ is the employee’s average hourly earnings 23 to the average hourly earnings of the for all work performed during that day. The employee is entitled to one-half the employee if, during a representative basic rate for each daily overtime hour in ad- period, the employee’s total overtime dition to the total piece work earnings for earnings calculated at the basic rate in the day. accordance with the applicable over- Example 2. An employee, who normally time provisions are approximately would come within the forty hour provision equal to the employee’s total overtime of section 7(a) of the Act, has a basic rate earnings computed on his average which is his monthly salary divided by the hourly earnings for each workweek in number of regular hours of work in the month. 24 If the salary is intended to cover accordance with section 7(a) of the straight-time compensation for a forty hour 22 Act. week he would be entitled to overtime for (b) The length of time constituting a every hour after forty computed on the basis representative period will depend on of one and one-half times the established the factors that cause the employee’s basic rate, in addition to his monthly salary. average hourly earnings to vary appre- If the salary is intended to cover a workweek ciably from week to week. For in- shorter than forty hours, such as thirty-five stance, if the variation in earnings of hours, he would be entitled to additional straight time at the basic rate for the hours an employee paid on an incentive basis between thirty-five and forty and also to is due to the difference in availability overtime at one and one-half time that rate of work in the slow and busy seasons for all hours worked in excess of forty in a the period used for comparison of over- week. time earnings would have to include [20 FR 5683, Aug. 6, 1955, as amended at 26 FR both a slow and a busy season in order 7732, Aug. 18, 1961] to be representative. Likewise, if a piece-worker’s average hourly earnings § 548.501 Overtime hours based on vary appreciably from week to week nonstatutory standards. because of differences in materials or Many employees are paid daily over- styles worked on, the period used for time pay or Saturday overtime pay or purposes of comparison would have to overtime pay on a basis other than the include work on the different materials statutory standard of overtime pay re- and styles in order to be representa- quired by section 7(a) of the Act. In tive. these cases, the number of hours for [20 FR 5683, Aug. 6, 1955] which an employee is paid at least one and one-half times an established basic COMPUTATION OF OVERTIME PAY rate must equal or exceed the number of hours worked in excess of the appli- § 548.500 Methods of computation. cable number of hours established in The methods of computing overtime section 7(a) of the Act in the work- pay on the basic rates for piece work- week. However, only overtime hours under the employment agreement 21 See §§ 778.200 through 778.207 of this chap- which also qualify as overtime hours ter for further discussion of overtime pre- under section 7(e) (5), (6), or (7) of the miums which may be excluded from the reg- Act 25 may be offset against the hours ular rate of pay. of work in excess of the applicable 22 See §§ 778.208 through 778.225 of this chap- ter for further discussion of the exclusion of vacation pay, holiday pay, discretionary bo- 23 See § 548.302. nuses and other payments from the average 24 See § 548.301. hourly earnings which comprise the employ- 25 See §§ 778.201 through 778.207 of this chap- ee’s regular rate of pay. ter. 245 VerDate Jul<17>2002 08:31 Jul 21, 2002 Jkt 197105 PO 00000 Frm 00245 Fmt 8010 Sfmt 8010 Y:\SGML\197105T.XXX pfrm17 PsN: 197105T § 548.502 29 CFR Ch. V (7–1–02 Edition) number of hours established in section AUTHORITY: Sec. 7, 52 Stat. 1063, as amend- 7(a) of the Act. ed; 29 U.S.C. 207. [26 FR 7732, Aug. 18, 1961] SOURCE: 18 FR 3292, June 10, 1953, unless otherwise noted. § 548.502 Other payments. Extra overtime compensation must § 549.0 Scope and effect of regulations. be separately computed and paid on (a) The regulations in this part set payments such as bonuses or shift dif- forth the requirements of a ‘‘bona fide ferentials which are not included in the profit-sharing plan or trust’’ under sec- computation of the established basic tion 7(e)(3)(b) of the Fair Labor Stand- rate and which would have been in- ards Act of 1938, as amended (herein- cluded in the regular rate of pay. 26 after called the Act). In determining Example 1. An employee is paid on an hour- the total remuneration for employ- ly rate basis plus a production bonus, and ment which section 7(e) of the Act re- also a shift differential of 10 cents for each quires to be included in the regular hour worked on the second shift. The author- rate at which an employee is employed, ized basic rate under the agreement is the it is not necessary to include any sums employee’s daily average hourly earnings, and under the employment agreement he is paid to or on behalf of such employee, paid one and one-half times the basic rate for in recognition of services performed by all hours worked in excess of 8 each day. him during a given period, which are Suppose his production bonus is included in paid pursuant to a bona fide profit- the computation of the basic rate, but the sharing plan or trust meeting the re- shift differential is not. In addition to over- time compensation computed at the basic quirements set forth herein. In the for- rate the employee must be paid an extra 5 mulation of these regulations due re- cents for each overtime hour worked on the gard has been given to the factors and second shift. standards set forth in section 7(e)(3)(b) Example 2. A piece worker, under his em- of the Act. ployment agreement, is paid overtime com- (b) The inclusion or exclusion from pensation for daily overtime and for hours of work on Saturday based on an authorized the regular rate of contributions made basic rate obtained by averaging his piece by an employer pursuant to any plan or work earnings for the half-month. In addi- trust for providing old age, retirement, tion, he is paid a monthly cost-of-living life, accident or health insurance or bonus which is not included in the computa- similar benefits for employees (regard- tion of the basic rate. It will be necessary for the employer to compute and pay overtime less of whether the plan or trust is fi- compensation separately on the bonus. 27 nanced out of profits) is governed by section 7(e)(4) of the Act, the require- [20 FR 5683, Aug. 6, 1955] ments of which are set forth in the In- terpretative Bulletin on Overtime PART 549—REQUIREMENTS OF A Compensation, part 778, of this chapter, ‘‘BONA FIDE PROFIT-SHARING §§ 778.214 and 778.215. However, where PLAN OR TRUST’’ such a plan or trust is combined in a single program (whether in one or more Sec. documents) with a plan or trust for 549.0 Scope and effect of regulations. 549.1 Essential requirements for qualifica- providing profit-sharing payments to tions. employees, the profit-sharing pay- 549.2 Disqualifying provisions. ments may be excluded from the reg- 549.3 Distinction between plan and trust. ular rate if they meet the requirements 549.4 Petition for amendment of regula- of the regulations in this part and the tions. contributions made by the employer for providing the benefits described in 26 Unless specifically excluded by agree- ment or understanding and prior authoriza- section 7(e)(4) of the Act may be ex- tion is obtained from the Administrator. See cluded from the regular rate if they § 548.400(b). meet the tests set forth in the Inter- 27 See § 778.209 of this chapter for an expla- pretative Bulletin, part 778, of this nation of how to compute overtime on the chapter, §§ 778.214 and 778.215. bonus. 246 VerDate Jul<17>2002 08:31 Jul 21, 2002 Jkt 197105 PO 00000 Frm 00246 Fmt 8010 Sfmt 8010 Y:\SGML\197105T.XXX pfrm17 PsN: 197105T.