The federal Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §§ 201-219 (the “FLSA”), and its corresponding regulations, 29 C.F.R. § 510 et seq., require that most employees in the U.S. be paid not less than the federal minimum wage of $7.25 per hour for all hours worked and overtime pay at 1½ times their regular rate of pay for all hours worked in excess of 40 hours in a workweek.
Similarly, the New York State Minimum Wage Act, N.Y. Labor Law § 650 et seq., and section 142 of Title 12 of the New York Code of Rules and Regulations require that employees in New York be paid not less than the New York minimum wage of $7.25 per hour for all hours worked. Covered employees who work overtime must be paid at a rate that is 1½ times their regular, “straight-time” hourly rate of pay.
If your company in New York State fails to pay its employees overtime compensation which they are due, but your company pays other types of extra compensation to its employees, does that extra renumeration offset your company’s liability to its workers for the unpaid overtime compensation? The answer depends on the type of, and the timing of the payments of, the extra compensation that your company pays to its employees.
By “extra compensation” or “extra renumeration” this post means amounts which are excluded from an employee’s compensation for purposes of computing an employee’s regular rate.
Under the FLSA, the following types of extra compensation are creditable toward overtime compensation that is due an employee:
- Amounts paid at a premium rate for hours of work which are in excess of eight hours in a day, in excess of 40 hours in a week, or in excess of the employee’s regular working hours; and
- Amounts paid at a premium rate of at least one and one-half the employee’s straight-time rate for hours of work which take place on weekends, holidays, or other days of rest or on a sixth or seventh day of work in a week.
See FLSA § 7(h)(2), 29 U.S.C. § 207(h)(2); FLSA § 7(e)(5), 7(e)(6), 7(e)(7), 29 U.S.C. §§ 207(e)(5), 207(e)(6), 207(e)(7).
Only the “premium” portion of the premium rate (the extra one-half on top of the regular rate) may be utilized to offset a company’s liability to its workers for unpaid overtime compensation. Rudy v. City of Lowell, No. 07-11567-NMG (D. Mass. Mar. 14, 2011).
Further, “although the Second Circuit has not addressed the issue of cumulative offsets,” the U.S. District Court for the Southern District of New York repeatedly has held that damages for unpaid overtime are to be calculated on a workweek basis and that any offsets under section 7(h)(2) of the FLSA may only be attributed to the single workweek in which the extra compensation and the overtime pay were earned. Conzo v. City of New York, 667 F. Supp.2d 279, 290-291 (S.D.N.Y. 2009); see also Scott v. City of New York, 592 F. Supp.2d 475 (S.D.N.Y. 2008). In other words, a company’s underpayment of overtime pay in one week cannot be offset by extra renumeration paid in a different week.
Under the FLSA, the following types of extra compensation are not creditable toward overtime compensation that is due an employee:
- Gifts or discretionary bonuses;
- Amounts paid because of holiday, illness, or the failure of the employer to provide sufficient work;
- Amounts paid as reimbursement of expenses;
- Amounts paid to pension plans or health insurance plans; and
- Under certain conditions, value or income derived from stock options, stock appreciation rights, or employee stock purchase programs.
See FLSA § 7(h)(1), 29 U.S.C. § 207(h)(1); FLSA § 7(e)(1) – 7(e)(4), 7(e)(8), 29 U.S.C. §§ 207(e)(1) – 207(e)(1) – 207(e)(4), 207(e)(8).
Call the Law Offices of David S. Rich, LLC at (212) 209-3972 to speak with a knowledgeable labor and employment lawyer about ensuring that your company complies with overtime pay and other wage and hour laws, or to retain a skilled overtime attorney to defend your company in unpaid overtime lawsuits or other wage and hour litigation.