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May 21, 2024
Calculating Overtime for Employee with Two Different Pay Rates

by Elizabeth R. Lanzhammer

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Q.    A restaurant employee works two jobs—as kitchen help earning above the minimum wage and as waitstaff earning $2.13 per hour plus tips. He works less than 40 hours per week in each job but works over 40 hours for the two jobs combined. Is he entitled to overtime pay?

A.    The Fair Labor Standards Act (FLSA) and parallel state laws require that nonexempt employees receive overtime pay for all hours worked in excess of 40 hours in any one workweek. Even if an employee is performing two different kinds of work with different pay rates, all hours worked must be combined for overtime pay purposes.

That means the hours your employee works as kitchen help must be combined with the hours he works as waitstaff to determine if the 40-hour threshold for overtime pay is exceeded in any particular workweek. If so, the employee is entitled to overtime pay in that workweek—at one and one-half times the employee’s regular rate of pay for all hours worked in excess of 40 hours.

That leaves the question of how to calculate overtime given that the employee is paid at two different pay rates for the different jobs. The FLSA provides that when an employee works two or more different jobs paid at different rates (of not less than the applicable minimum wage) in a workweek, the employee’s regular pay rate for the week is the weighted average of the rates.

That is, the employee’s total earnings for the workweek from all the rates are divided by the total number of hours worked at all the jobs to determine the regular rate of pay for overtime.

A few words of caution: First, keep in mind that the regular pay rate for a tipped employee can’t be less than the amount of direct cash wages paid plus the tip credit claimed. In other words, when an employer takes a tip credit, overtime must be calculated based on the full minimum wage, which is currently $7.25 an hour, not the lower direct (or cash) wage payment.

Second, state minimum wage and overtime laws may vary. You must remember to verify the state law where you have employees and pay them according to whichever law—state or federal—provides the greater benefit to employees.

Elizabeth Lanzhammer is a partner with Axley Brynelson, LLP, in Madison, Wisconsin. Elizabeth (Liz) is a partner in Axley’s Family Law Practice Group where she focuses her practice on divorce, child support, placement, paternity judgments and termination of parental rights, and stepparent adoptions. She can be reached at 608-283-6718 or elanzhammer@axley.com.

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