Nonexempt employee FAQs

Can we pay a lower hourly rate for training?

You can pay less than the usual hourly rate for training, as long as you pay at least minimum wage. It's fairly common for employers to establish different rates of pay for different types of work (see the federal overtime regulation at §778.115, Employees working at two or more rates). Employers may establish different (lower) hourly rates for things like training, traveling, or other tasks outside the usual job duties. As long as the amount provides at least minimum wage, you could even pay a flat rate such as $10 per training course.

The above regulation explains that if overtime occurs, the employee can be paid overtime based on an average hourly rate for the week. For example, if the employee worked 40 hours at $20 per hour (earning $800) and took a one hour course for $10, the total earnings of $810 are divided by the 41 hours worked to give an average hourly rate of $19.76, and overtime can be at 1.5 times this rate. Of course, you could avoid the calculation and simply pay overtime using the usual (higher) hourly rate, since that would always be more than 1.5 times the average rate.

Can we pay a flat amount for travel, such as $100 per day?

You can pay a flat amount for any day of travel, regardless of how long it takes, as long as the employee still gets at least minimum wage for all hours worked. For example, if the employee spent 10 hours traveling and was paid $100, his effective hourly rate is $10 per hour. Of course, if the employee only spent four hours traveling, his effective hourly rate is $25 per hour. If overtime occurs that week, the total compensation received (both hourly and flat rates) would be divided by the total hours worked to find an average hourly rate. Overtime would be paid on that average rate.

A flat rate has the potential to either increase or decrease the overtime rate, depending on the amount of time spent traveling. Note that a flat rate which covers any number of hours can never be assumed to include overtime, even if the calculated amount (like $25 per hour) would exceed the employee's usual overtime rate. This is given in the federal regulation at §778.310, which begins as follows:

A premium in the form of a lump sum which is paid for work performed during overtime hours without regard to the number of overtime hours worked does not qualify as an overtime premium even though the amount of money may be equal to or greater than the sum owed on a per hour basis.

Can we offer travel reimbursement for some employees, but not for others?

The Fair Labor Standards Act does not require expense reimbursement, and you can have different policies for different categories of employees. Choosing to offer reimbursement to some employees, but not others, should be acceptable as long as the difference is based on employee classification (such as executives vs. hourly employees) and is not based on protected status (age, race, gender, national origin, etc.). Note that some state laws require employers to reimburse employees for travel expenses. States with such provisions include California, Massachusetts, and New Hampshire.

When employees are on call, can we pay an hourly rate that is below minimum wage?

If employees are not actually working while on call, and are generally free to use the time however they choose, they do not have to be paid the minimum wage for time spent on-call. If the restrictions imposed during on-call time do not prevent the employee from engaging in personal activities, the employee is not working. Therefore, the minimum wage does not apply (because the employee is being paid for non-working time). An opinion letter from the Wage and Hour Division (FLSA2008-6) offers the following:

The payment received by employees for "on call" time, however, is "paid as compensation for performing a duty involved in the employee's job" and is therefore not excludable from the regular rate. ... As a result, the payment must be included in the employee's regular rate. ... Moreover, because the specific hours for which on-call pay was earned are identifiable, the payment for on-call time must be attributed to the workweek in which the on-call hours occurred.

Although most employers do not count holiday, vacation, or sick pay toward overtime (and are not required to do so), employers who offer compensation for being on call must ensure that the payment is included in the employee's regular hourly rate for the week in which it was provided.

If an employee fails to turn in a timesheet, can we delay issuing a paycheck?

An employee's failure to turn in a timesheet is not a valid excuse for denying or delaying payment of wages owed. One reason is simply that employees are not required to keep timesheets under any state or federal law. Timesheets are a creation of employers to assist with recordkeeping. In theory, an employee could verbally report the hours worked, and the employer could create the required records.

The employee should be paid wages owed on the scheduled payday, even if a timesheet was never turned in. If you have reason to believe that the employee worked certain hours or days, and no reason to believe that the employee was NOT working during that time, processing a paycheck for the anticipated hours should be reasonable. If there were overtime or other hours that you could not reasonably have known about, the extra compensation might be provided on a later paycheck, after the employee reports the time. Of course, an employee can be subject to discipline for failing to follow procedures, such as turning in a timesheet by the scheduled deadline.