FLSA2018-28 — Determining minimum wage and overtime compliance for employees with varying average hourly rates

U.S. Department of Labor Wage and Hour Division
Washington, DC 20210

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FLSA2018-28
December 21, 2018
Dear Name*:
This letter responds to your request for an opinion letter regarding whether your client’s
compensation plan, which pays an average hourly rate that may vary from workweek to
workweek, complies with the Fair Labor Standards Act (FLSA). This opinion is based
exclusively on the facts you have presented. You represent that you do not seek this opinion for
any party that the Wage and Hour Division (WHD) is currently investigating or for use in any
litigation that commenced prior to your request.
BACKGROUND
You state that the employer provides home health aide services to its clients in their homes.
Some of its employees travel between client locations during the workday. To calculate weekly
pay, the employer multiplies an employee’s time with clients by his or her hourly pay rate for
such work. The employer then divides the product by the employee’s total hours worked, which
includes both the client time and the travel time. The employer guarantees that the quotient
meets both federal and state minimum wage rate requirements. You further state that “[a] typical
standard rate of pay is $10.00 per hour with a client including travel time,” and that “[i]f any
employee works over 40 hours (total paid hours and [travel] time) in any given workweek, they
are paid time and a half for all time over 40 hours at a rate of $10.00.”
GENERAL LEGAL PRINCIPLES
The FLSA requires that covered, nonexempt employees receive at least the federal minimum
wage for all hours worked. See 29 U.S.C. § 206(a)(1). “[I]f the employee’s total wages for the
workweek divided by compensable hours equal or exceed the applicable minimum wage, the
employee has been paid in compliance with [§ 206].” WHD Opinion Letter FLSA2004-8NA,
2004 WL 5303036, at *2 (Aug. 12, 2004); WHD Field Operations Handbook § 30b02. The
FLSA also requires that covered, nonexempt employees receive overtime compensation of at
least one and one-half times their regular rate of pay for time worked in excess of 40 hours per
workweek. See 29 U.S.C. § 207(a)(1). Generally, to determine the regular rate of pay, an
employer divides the employee’s “remuneration for employment” (subject to the exclusions in
29 U.S.C. § 207(e)) by the total hours worked for the workweek. See 29 C.F.R. § 778.109.
OPINION
Based on the facts you provided, the employer’s compensation plan complies with the FLSA’s
minimum wage requirements. Although an employee’s average hourly pay rate may vary from
workweek to workweek, the employer always ensures that the average hourly pay rate exceeds
the FLSA’s minimum wage requirement for all hours worked. See 29 U.S.C. § 206(a)(1); U.S. v.

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Klinghoffer Bros. Realty Corp., 285 F.2d 487, 490 (2d Cir. 1960) (holding that, notwithstanding
some unpaid hours worked, an employer complied with the FLSA because the “average hourly
wage” exceeded the federal minimum wage).
The employer’s compensation plan, however, may not comply with the FLSA’s overtime
requirements. If the employer always assumes a regular rate of pay of $10 per hour when
calculating overtime due, then the employer will not pay all overtime due to employees whose
actual regular rate of pay exceeds $10 per hour. 29 C.F.R. § 778.107. Neither an employer nor
an employee may arbitrarily choose the regular rate of pay; it is an “actual fact” based on
“mathematical computation.” Walling v. Youngerman-Reynolds Hardwood Co., Inc., 325 U.S.
419, 424–25 (1945); 29 C.F.R. § 778.108. That said, the compensation plan does comply with
the FLSA’s overtime requirements for all employees whose actual regular rates of pay are less
than $10 per hour, as an employer may choose to pay an overtime premium in excess of the
statutorily required amount. See, e.g., Molina v. First Line Solutions LLC, 566 F. Supp. 2d 770,
779 (N.D. Ill. 2007) (“[T]he FLSA only establishes a minimum floor that an employer is free to
exceed.”); WHD Opinion Letter FLSA2006-21NA, 2006 WL 4512963, at *2 (Oct. 5, 2006)
(confirming that employers may pay more than the FLSA requires).
We trust that this letter is responsive to your inquiry.
Sincerely,

Bryan L. Jarrett
Acting Administrator
*Note: The actual name(s) was removed to protect privacy in accordance with 5 U.S.C.
§ 552(b)(7).