Re-introducing: the Paycheck Warriors at Barkan Meizlish, LLP! The Paycheck Warriors is a bi-weekly column written by The Paycheck Warrior himself, Managing Partner Bob DeRose. Every other week, just like your paycheck, Bob will take the time to address commonly asked questions about wage and hour law. He will also take on wage and hour topics popping up in the news. Have a question? Leave a comment and see what The Paycheck Warrior has to say! Today’s topic: shift differentials
Employers must include shift differential in regular rate when calculating overtime.
You are working an afternoon shift at your company. You work six 8-hour shifts and get paid overtime for all hours you work over 40-hours per week. That sounds great until they forget about the fact that every afternoon shift worker has their hourly rate increased by $0.50 per hour – or a shift differential. When a worker is paid a shift differential, that additional money must be added to the hourly rate, or what is called the regular rate, when calculating the rate that overtime hours are paid. If the company does not include the shift differential when calculating overtime pay, the workers are being cheated out of their hard-earned money!
The Department of Labor (DOL) has specific rules on how overtime must be paid. Overtime is paid at 1.5 times a worker’s “regular rate” not their hourly rate. One of the most common mistakes employers make is not including shift differential in the regular rate when paying overtime. So, what does the FLSA consider an employee’s “regular rate?” To compute the regular rate, you take all compensation an employee earned in a workweek and divide it by the total hours worked in that workweek.
Employee makes $10.00 per hour and works 50-hours per week. The overtime rate for the 10-hours she worked over forty is $15.00 per overtime hour. The regular rate is in this example is the same as the hourly rate. However, if she received a $0.50 per hour shift differential during the week, her regular rate has to include $0.50 for each hour she was paid the shift differential.
Let us say she usually works day shift and is paid $10.00 per hour but gets $10.50 ($0.50 shift differential) when she works afternoon shift. In our example she worked two 8-hour afternoon shifts in the week she worked 50-hours. Her regular rate is calculated by taking 34-hours multiplied by $10.00 ($340.00) and 16-hours multiplied by $10.50 ($168.50) for a total of $508.00. Divide the $508 by 50-hours and her regular rate is $10.16. Thus, each overtime hour must be paid at 1.5 times $10.16 or $15.24.
In our example, if her employer did not include the shift differential in her regular rate then she was cheated out of ten overtime hours at $15.24, or $2.40 for that week. This amount may not seem like much to the reader, but for her, since she did the work, it is wage she earned and is entitled to receive.
DOL overtime rules are complex, but overtime is one of the most regulated areas in employment. If an employer fails to pay overtime correctly, an employee could file a wage and hour claim against them. Those claims can get expensive as they often result in back overtime wages plus liquidated damages that must be paid to employees who win their case(s).
I hope that you found this blog post helpful. I would love to hear your feedback or any questions about the topic discussed in my blogs at barkanmeizlish.com/blog.
Thank you for reading!
Bob DeRose, Esq.
Attorney at Law | The Paycheck Warrior!
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This information is not a substitute for individualized legal advice. Although we have attempted to provide accurate and current information, the laws in your jurisdiction may be different from those described here. If you have questions about your specific wage issue, you should contact an attorney to seek specific advice. If you have any questions about overtime or would like more information on how to correctly pay overtime, please contact Barkan Meizlish DeRose Cox, LLP. We are happy to help!