United States: DOL's Opinion Letter Tackles Varying Average Wage Rates And FLSA Overtime Compliance

On December 21, 2018, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) released an opinion letter, FLSA2018-28, in which it addresses minimum wage and overtime pay requirements for employees with varying average hourly rates. The employer in question calculates pay by multiplying an employee’s time with clients by his or her hourly rate and then dividing that number by the employee’s total hours worked, a figure that includes both client time and compensable travel time. The resulting pay complies with minimum wage requirements. If an employee works more than 40 hours in a week, he or she is paid time and a half using a rate of $10 an hour for overtime hours worked regardless of his or her actual average hourly rate or regular rate of pay. The U.S. DOL/WHD found that this compensation system does not comply with the Fair Labor Standards Act’s (FLSA) overtime requirement when the employee’s actual regular rate of pay exceeds $10 per hour.

What are some common, lawful ways that an employer can calculate nonexempt employees’ pay?

Under the FLSA, an employer can pay its nonexempt employees in a number of lawful ways, be it based on an hourly rate, a daily rate, a piece rate, commissions, a job rate, or a set salary. An employer also may pay its employees using a combination of these legal options. For example, an employer can pay an employee in a retail setting an hourly rate of pay plus commissions. Depending on the work performed and the type of business or industry, the manner in which nonexempt employees are paid may vary. The most common way employers pay their employees is by an hourly rate of pay. Additionally, some employers pay their nonexempt employees a type of nondiscretionary bonus or other payment for perfect attendance, quality or quantity of work, working off-shifts, etc.

Regardless of the manner in which an employer pays its employees and the type of nondiscretionary payment an employer may make to its nonexempt employees, such compensation must be reduced to an hourly rate of pay for workweeks in which an employee works overtime. This hourly rate of pay is referred to as a nonexempt employee’s “regular rate,” which is then used to compute the overtime premium pay due an employee.   

Is the method for calculating weekly pay described in this opinion letter unusual in any way?

The methodology described in this opinion letter is not all that unusual, but it is not totally legal. The opinion letter affirms that the particular employer’s pay practices comply with the minimum wage requirement but fail to meet the overtime requirement of the FLSA. The methodology used by the employer, or some variation of it, is commonly used by employers in the home healthcare industry. However, as the opinion letter points out, overtime premium pay cannot be paid based on an assumption of what a nonexempt employee’s regular rate may be. Instead, overtime pay must be computed using an employee’s actual regular rate, at a minimum. 

The opinion letter indicates that the FLSA’s overtime requirement wouldn’t be satisfied for workers whose regular rate of pay exceeds $10 per hour under this compensation plan. Is this a big change in the law that some employers will have to adjust to, or was this previously unlawful?

The opinion letter’s instructions on how to compute and pay an overtime premium to a nonexempt employee is not a change in the law, so it should not result in any employer having to modify its pay practices unless the employer previously failed to comply with the FLSA’s overtime requirement.

Is the pay method described in this opinion letter the same as the fluctuating workweek method?

The pay practices described in the opinion letter are not consistent with the fluctuating workweek methodology for a number of reasons. The pay practices described in the letter essentially represent an hourly rate methodology where a nonexempt employee is paid an hourly rate of pay for each hour spent with patients. This hourly rate sufficiently exceeds the federal minimum wage rate so that when an employee’s compensable travel time is added to their compensable work time with patients, the nonexempt employee is paid at least minimum wage for all hours worked.

Relying on a 1942 decision by the Supreme Court of the United States, the U.S. DOL/WHD and many federal courts have recognized the fluctuating workweek methodology as complying with the FLSA’s overtime requirement. The fluctuating workweek methodology is different and essentially requires that (1) an employee is paid a fixed salary for each workweek without regard to the number of hours he or she actually worked; (2) the nonexempt employee’s hours of work fluctuate or vary workweek to workweek; (3) the employee and employer understand that the salary represents straight-time compensation for all hours worked in a workweek by the nonexempt employee, regardless of the number of hours worked; (4) the salary is of a sufficient amount such that the employee receives at least minimum wage for each hour worked in any workweek; and (5) the nonexempt employee is paid an overtime premium for all hours worked in excess of 40 in a workweek by using a regular rate determined by dividing the fixed salary by the total number of hours worked in a workweek and multiplying one half of that regular rate by the total number of hours worked in excess of 40 in that particular workweek. Since a nonexempt employee’s hours will vary or fluctuate in a workweek under the fluctuating workweek method, so too will their regular rate vary in each overtime workweek. These requirements are set forth in 29 C.F.R. § 778.114. 

How might the business in this opinion letter adjust its compensation plan to comply with the FLSA?

The employer that is the subject of this opinion letter must compute the actual regular rate of any nonexempt employee when it exceeds $10 an hour for each overtime workweek in order to accurately compute the overtime premium pay to which an employee is entitled.

Is this applicable in all jurisdictions?

It is important to note that the methodology used by the employer in the opinion letter may not comply with some state laws. This methodology may not comply with some state laws because the employer does not pay an employee compensation for each hour worked by an employee, such as compensable travel time. Employers may want to check with state and local laws as well.

What can employers take away from this opinion letter?

The main takeaway is that compensation for nonexempt employees under the FLSA is a function of two components: hours worked and compensation expressed as an employee’s regular rate. The key is that an employer must use actual data for both of these components in order to compute correctly the amount of wages and overtime compensation due an employee. It is legal to pay more than is due, but it is not legal to pay an employee less than the amount of wages and overtime due to him or her.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions