Purported 'per diem' payments must be included in overtime calculation

Under the Fair Labor Standards Act (FLSA), the federal law the mandates minimum wage and overtime compensation for most employees, overtime is payable for all hours worked over 40 in a workweek at the rate of 1.5 times the employee's "regular rate" of pay. So what is the employee's regular rate? The U.S. 9th Circuit Court of Appeals (whose rulings apply to all California employers) recently addressed whether an employer's per diem payments to employees working away from home should be included in calculating their regular rate.

Background

The FLSA requires that, in general, all forms of compensation, no matter their type, be included in calculating the regular rate. For an employee who is paid on an hourly rate only, with no other types of compensation or benefits, the regular rate is her hourly rate of pay. But if the employee also receives a weekly attendance bonus of $200, the bonus must be added to her hourly earnings to determine her regular rate, thereby increasing her overtime rate of pay.

What happens, however, if the employee also receives other forms of compensation, either in monetary form or in employee benefits of some kind? They, too, must be included unless they come within one of the specific "exclusions" contained in the FLSA.