Unpaid overtime lawsuit investigation

Overtime miscalculation: Who’s affected?

Did your employer miscalculate your overtime pay by excluding extra pay from your base hourly wage? You may be entitled to unpaid overtime.

If you are an employee working overtime and suspect you might be underpaid, understanding your rights under wage and hour laws is crucial. Employers can mistakenly miscalculate overtime pay by not including all required forms of compensation in the regular rate, which could entitle you to additional wages. Common errors involve excluding shift differentials, commissions, hazard pay, and non-discretionary or performance-based bonuses from the regular rate when calculating overtime. These miscalculations can significantly impact your earnings.

How is overtime calculated?

Under the Fair Labor Standards Act (FLSA), employers must pay employees one-and-one-half times their regular rate for any hours worked over 40 in a workweek. However, overtime miscalculation can occur when employers fail to include all forms of compensation in the regular rate calculation.

When determining the regular rate of pay, employers must consider various forms of compensation beyond the base hourly wage. Missteps in this process lead to wage violations. For instance, employers sometimes neglect to include shift differentials, commissions, hazard pay, and non-discretionary bonuses. Each of these can significantly impact how overtime is calculated, leading to employees being underpaid for their extra work.

Shift differential pay

Shift differentials are additional payments made to employees who work less desirable hours, such as night shifts or weekends. These differentials are designed to incentivize workers to fill shifts that are difficult to staff. For example, if an employee’s regular hourly wage is $20, and they receive a $2 per hour shift differential for working the night shift, their regular rate for overtime calculation purposes should be $22 per hour. This would mean an overtime rate of $33 per hour instead of $30 per hour.  Failing to include the shift differential in the overtime calculation results in the employee receiving less than they are legally entitled to.

Commissions

In the retail sector and other commission-based industries, proper overtime calculation must include commissions from sales if they make up less than 50% of the employee’s total earnings. Suppose an employee earns a base hourly wage and additional commissions for sales. For instance, in the health and wellness industry, employees might receive commissions for signing up new gym members. If the commissions are significant but less than half of the total compensation, they must be included in the regular rate. Ignoring these commissions leads to an inaccurately low regular rate and, consequently, underpaid overtime wages.

Hazard pay

During the COVID-19 pandemic, many healthcare workers received hazard pay for working under increased-risk conditions. Hazard pay is an additional amount over the regular wages to compensate for dangerous work environments. For example, if a healthcare worker’s regular pay is $30 per hour, and they receive an additional $5 per hour as hazard pay, their regular rate for overtime should be $35 per hour. This would mean their overtime rate would be $52.50 per hour instead of $45 per hour.  Omitting hazard pay from the regular rate calculation during overtime determinations is a violation of wage and hour laws.

Non-discretionary and performance-based bonuses

Non-discretionary bonuses are another form of compensation that often must be included in the regular rate for overtime calculations. These bonuses are typically tied to performance metrics or productivity goals and are not given at the employer’s discretion.  For instance, if the employer has agreed to a bonus if a specific number of deliveries are made or a certain customer satisfaction survey level is reached, then the compensation from such a bonus would have to be included in the regular rate when calculating overtime for that week. Employers often overlook this requirement, leading to incorrect overtime payments.

Did your employer miscalculate your overtime pay?

Employers must ensure compliance with the FLSA to protect employees’ rights and avoid potential legal repercussions. This includes how overtime is calculated. If you were paid overtime that was not based on additional compensation that raised your base hourly wage, you may have a legal claim. 

Fill out the form on this page to see if you qualify for a free case evaluation.