- Employers may calculate the regular rate of pay for employees paid on a piece-rate basis — i.e., those paid per unit of production rather than a period of time — by dividing the employees' earnings by the number of hours worked in a workweek, including both productive and nonproductive hours, the U.S. Department Labor's (DOL) Wage and Hour Division said in a Nov. 30 opinion letter.
- The Fair Labor Standards Act (FLSA) stipulates that the regular rate for an employee paid on a piece-rate basis is calculated by totaling workweek earnings "from all sources," including production bonuses and waiting time, DOL said.
- Employers may use this calculation even if they do not have a written agreement with piece-rate employees to do so, DOL said. Such an understanding or agreement "'need not be in writing, but rather, may be inferred from the parties' conduct.'" Still, the agency noted that courts "have not always been consistent regarding the content or scope" of the FLSA's mutual understanding requirement.
DOL's letter may aid in overtime calculations for piece-rate workers under the FLSA. Per agency guidance, employees paid on a piece-rate basis are generally entitled to an additional one-half times their regular rate of pay for each hour over 40 in a given workweek, plus their full piecework earnings.
The department has issued a number of opinion letters in the past year addressing what may be included in an employee's regular rate of pay for FLSA overtime calculation purposes. In March, for example, DOL said that a longevity bonus must be included in the regular rate, as must certain installments of a referral bonus.
DOL also finalized in December 2019 a rule updating the FLSA's regular rate of pay requirements. The rule clarified that bona fide meal periods, reimbursements, certain benefit plan contributions, state and local scheduling law payments and other benefits may be excluded from the regular rate when calculating overtime pay for a non-exempt employee.
As with previous wage and hour opinion letters, DOL's interpretation may not apply to every situation, experts previously noted.