Hazard pay must be included in regular rate for overtime purposes, DOL says

Employers must include COVID-19 incentive payments, such as hazard pay, in an employee’s regular rate for calculating overtime payments, the U.S. Department of Labor (DOL) stated in recent guidance.

What new guidance says

Employers may compensate nonexempt employees in a variety of ways. To calculate the amount of overtime pay, you must first determine the employee’s regular rate of pay. Generally, you find it by dividing total compensation for employment, less any statutory exclusions, by the total number of hours worked. The Fair Labor Standards Act (FLSA) provides an exhaustive list of payments you may exclude from the regular rate when calculating overtime payments.

The DOL’s recent guidance clarified that employer-paid incentive payments—including hazard pay for work performed during the COVID-19 emergency—do not meet any statutorily authorized exclusion and thus must be included in the regular rate used to compute employees’ overtime pay. The requirement applies to both private and state or local government employers that have opted to provide incentive payments to employees for working during the crisis. The guidance specifically delineates between: