Q. Our organization has a policy of paying employees who perform certain kinds of work outside of regular business hours at 1-1/2 times their regular hourly rates. Do we have to pay additional overtime pay for these hours?

A. Maybe. The Fair Labor Standards Act requires employers to pay overtime at 1-1/2 times an employee’s “regular rate” of pay. The default method for calculating the regular rate is to divide the employee’s total non-overtime compensation for the workweek by the total number of hours worked.* Overtime pay is then calculated by multiplying one-half of the resulting regular rate by the number of overtime hours worked during the week. All compensation paid to an employee for their work in a given workweek must be included in the regular rate calculation unless the compensation falls within one of the exclusions specifically identified in the law.

One of the exclusions from the regular rate calculation is for bona fide overtime premiums. Compensation can count as a bona fide overtime premium if the rate of pay is at least 1.5 times the employees’ regular rate, and employees receive the premium for working in excess of an established number of hours per week or per day, for working on certain specified days of the week (e.g., Saturday or Sunday) or on special days (e.g., holidays), or for working outside certain established basic work hours. A premium rate that meets these requirements can be both excluded from the regular rate calculation for purposes of determining the overtime rate, and counted as a credit toward the amount of overtime pay due to the employee for the workweek.

Here, the premium rate described sounds as though it could qualify as a bona fide overtime premium, at least at first. It is 1-1/2 times the employee’s regular pay rate, and it is paid for working outside of regular business hours.

However, the question specifies that the premium rate is paid only for performing “certain kinds of work.” That qualification is important. A premium rate paid to encourage employees to perform certain job duties that might be viewed as less desirable, or to work less desirable shifts, is generally not a bona fide overtime premium and must be included in the regular rate calculation. As a result, an employee who receives the premium described may well be entitled to an additional overtime premium on top of the premium rate provided by the organization’s policy, even though the employee is already receiving “time and a half” for the work.

*As with most things under the FLSA, there are exceptions and provisos, but those are beyond the scope of this post.