24.16.2512 THE REGULAR RATE
(1) The "regular rate" of pay cannot be left to a declaration by the parties as to what is to be treated as the regular rate for an employee; it must be drawn from what happens under the employment contract. The U.S. Supreme Court has described it as the hourly rate actually paid the employee for the normal, nonovertime workweek for which he is employed - and "actual fact". The "regular rate" may be more than the minimum wage; it cannot be less. An employee's regular rate includes all payments made by the employer to or on behalf of that employee. "Once the parties have decided upon the amount of wages and the mode of payment the determination of the regular rate becomes a matter of mathematical computation, the result of which is unaffected by any designation of a contrary 'regular rate' in the wage contracts."
(2) The regular rate is an hourly rate. The "regular rate" under the Law is a rate per hour. The Law does not require employers to compensate employees on an hourly rate basis; their earnings may be determined on a piece-rate, salary, commission, or other basis, but in such case the overtime compensation due to employees must be computed on the basis of the hourly rate derived therefrom and, therefore, it is necessary to compute the regular hourly rate of such employees during each workweek. The regular hourly rate of pay of an employee is determined by dividing his total remuneration for employment in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid. The following subsections give some examples of the proper method of determining the regular rate of pay in particular instances: (The maximum hours standards used in these examples is 40 hours in a workweek.)
(a) Hourly rate employee.
(i) Earnings at hourly rate exclusively. If the employee is employed solely on the basis of a single hourly
rate, the hourly rate is his "regular rate". For his overtime work he must be paid, in addition to his straight time hourly earnings, a sum determined by multiplying one-half the hourly rate by the number of hours worked in excess of 40 in the week. Thus a $2 hours rate will bring, for an employee who works 46 hours, a total weekly wage of $98 (46 hours at $2 plus 6 at $1) . In other words, the employee is entitled to be paid an amount equal to $2 an hour for 40 hours and $3 an hour for the 6 hours of overtime, or a total of $98.
(ii) Hourly rate and bonus. If the employee receives, in addition to his earnings at the hourly rate, a production bonus of $4.60, the regular hourly rate of pay is $2.10 an hour (46 hours at $2 yields $92; the addition of the $4.60 bonus makes a total of $96.60; thus total divided by 46 hours yields a rate of $2.10) . The employee is then entitled to be paid a total wage of $102.90 for 46 hours (46 hours at $2.10 plus 6 hours at $1.05, or 40 hours at $2.10 plus 6 hours at $3.15) .
(i) Piece rates and supplements generally. When an employee is employed on a piece-rate basis, his regular rate of pay is computed by adding together his total earnings for the workweek from piece rates and all other sources (such as production bonuses) and any sums paid for waiting time or other hours worked (except statutory exclusions) . This sum is then divided by the number of hours worked in the week for which such compensation was paid, to yield the piece workers "regular rate" for that week. For his overtime work the pieceworker is entitled to be paid in addition to this total weekly earnings at this regular rate for all hours worked, a sum equivalent to one-half this regular rate of pay multiplied by the number of hours worked in excess of 40 in the week. Only additional half-time pay is required in such cases where the employee has already received straight-time compensation at piece rates or by supplementary payments for all hours worked. Thus, if the employee has worked 50 hours and has earned $92.00 at piece rates for 46 hours of productive work and in addition has been compensated at $2.00 an hour for 4 hours of waiting time, his total compensation, $100.00, must be divided by his total hours of work, 50, to arrive at his regular hourly rate of pay - $2.00. For the 10 hours of overtime the employee is entitled to additional compensation of $10.00 (10 hours at $1.00) . For the week's work he is thus entitled to a total of $110.00 (which is equivalent to 40 hours at $2.00 plus 10 overtime hours at $3.00) .
(ii) Piece rates with minimum hourly guarantee. In some cases an employee is hired on a piece rate basis coupled with a minimum hourly guarantee. Where the total piece rate earnings for the workweek fall short of the amount that would be earned for the total hours of work at the guaranteed rate, the employee is paid the difference. In such weeks the employee is in fact paid at an hourly rate and the minimum
hourly guarantee which he was paid in his regular rate in that week. In the example just given, if the employee was guaranteed $2.10 an hour for productive working time, he would be paid $96.60 (46 X $2.10) for the 46 hours of productive work (instead of the $92.00 earned at piece rates) . In a week in which no waiting time was involved, he would be owed an additional $1.05 (half time) for each of the 6 overtime hours worked, to bring his total compensation up to $102.90 (46 hours at $2.10 plus 6 hours at $1.05 or 40 hours at $2.10 plus 6 hours at $3.15) . If he is paid at a different rate for waiting time, his regular rate is the weighted average of the 2 hourly rates, as discussed in subsection (f) of ARM 24.16.2512.
(c) Day rates and job rates. If the employee is paid a flat sum for a day's work or for doing a particular job, without regard to the number of hours worked in the day or at the job, and if he receives no other form of compensation for services, his regular rate is determined by totalling all the sums received at such day rates or job rates in the workweek and dividing by the total hours actually worked. He is then entitled to extra half-time pay at this rate for all hours worked in excess of 40 in the workweek.
(d) Salaried employees - general.
(i) Weekly salary. If the employee is employed solely on a weekly salary basis, his regular hourly rate of pay, on which time and a half must be paid, is computed by dividing the salary by the number of hours which the salary is intended to compensate. If an employee is hired at a salary of $105 and if it is understood that this salary is compensation for a regular workweek of 35 hours, or $3.00 an hour, and when he works overtime he is entitled to receive $2 for each of the first 40 hours and $4.50 (one and one-half times $3.00) for each hour thereafter. If an employee is hired at a salary of $105 for a 40 hour week, his regular rate is $2.625 an hour.
(ii) Salary for period other than workweek. Where the salary covers a period longer than a workweek, such as a month, it must be reduced to its workweek equivalent. A weekly wage by multiplying by 12 (the number of months) and dividing by 52 (the number of weeks) . A semimonthly salary is translated into its equivalent weekly wage by multiplying by 24 and dividing by 52. Once the weekly wage is arrived at, the regular hourly rate of pay will be calculated as indicated above. The regular rate of an employee who is paid a regular monthly salary of $346.67, or a regular semimonthly salary of $173.34 for 40 hours a week, is thus found to be $2.00 per hour.
(e) Fixed salary for fluctuating hours.
(i) An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a
workweek, whether few or many. Where there is a clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period, such a salary arrangement is permitted by the Law if the amount of the salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours he works is greatest, and if he receives extra compensation, in addition to such salary, for all overtime hours worked at a rate not less than one-half his regular rate of pay. Since the salary in such a situation is intended to compensate the employee at straight time rates for whatever hours are worked in the workweek, the regular rate of the employee will vary from week to week and is determined by dividing the number of hours worked in the workweek into the amount of the salary to obtain the applicable hourly rate for the week. Payment for overtime hours at one-half such rate in addition to the salary satisfies the overtime pay requirement because such hours have already been compensated at the straight time regular rate, under the salary arrangement.
(ii) The application of the principles above stated may be illustrated by the case of an employee whose hours of work do not customarily follow a regular schedule but vary from week to week, whose overtime work is never in excess of 50 hours in a workweek, and whose salary of $100 a week is paid with the understanding that it constitutes his compensation, except for overtime premiums, for whatever hours are worked in the workweek. If during the course of 4 weeks this employee works 40, 44, 50, and 48 hours, his regular hourly rate of pay in each of these weeks is approximately $2.50, $2.27, $2.00, and $2.08, respectively. Since the employee has already received straighttime compensation on a salary basis for all hours worked, only additional half-time pay is due. For the first week the employee is entitled to be paid $100.00; for the second week $104.42 ($100 plus 4 hours at $1.135, or 40 hours at $2.27 plus 4 hours at $3.405) ; for the third week $100 ($100 plus 10 hours at $1.00 or 40 hours at $2.00 plus 10 hours at $3.00) ; for the fourth week approximately $108.32 ($100 plus 8 hours at $1.04 or 40 hours at $2.083 plus 8 hours at $3.121) .
(iii) The "fluctuating workweek" method of overtime payment may not be used unless the salary is sufficiently large to assure that no workweek will be worked in which the employee's average hourly earnings from the salary fall below the minimum hourly wage rate applicable under the Law, and unless the employee clearly understands that the salary covers whatever hours the job may demand in a particular workweek and the employer pays the salary even though the workweek is one in which a full schedule of hours is not
worked. Typically, such salaries are paid to employees who do not customarily work a regular schedule of hours and are in amounts agreed on by the parties as adequate straight-time compensation for long workweeks as well as short ones, under the circumstances of the employment as a whole. Where all the legal prerequisites for use of the "fluctuating workweek" method of overtime payment are present, the Law, in requiring that "not less than" the prescribed premium of 50 percent for overtime hours worked be paid, does not prohibit paying more. On the other hand, where all the facts indicate that an employee is being paid for his overtime hours at a rate no greater than that which he receives for nonovertime hours, compliance with the Law cannot be rested on any application of the fluctuating workweek overtime formula.
(f) Employees working at two or more rates. Where an employee in a single workweek works at two or more different types of work for which different nonovertime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates. That is, his total earnings are computed to include his compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs.
History: Sec. 39-3-403, MCA; IMP, 39-3-404 & 39-3-405, MCA; Eff. 12/31/72.