UNTED STATES SUPREME COURT HOLDS EMPLOYEES PAID ON A DAY RATE BASIS ARE ENTITLED TO OVERTIME PAY.

Article By Patrick Mansfield | Best Rated Law Firms | 03/09/2023

Article Summary

  • U.S. Supreme Court Holds Employees Paid on a 'Day Rate' Basis Are Entitled to Overtime Pay.

    1. An employer must pay a non-exempt employee whose pay is computed on a "day rate" basis straight time for each hour worked up to 40 hours in the workweek, and overtime for all hours in excess of 40 hours in the workweek.


    2. Day rate employees are those who are paid an agreed sum for each day’s work regardless of how many hours they actually work.


    3. In order to determine whether or not an employer must pay overtime, the Court examined the type of agreement between the employer and employee about wages - specifically, that it requires close examination as to whether an employee was promised only “a daily rate of pay without more” (as expected with a day rate) or if the parties agreed that payment would be on some other basis - such as at an hourly or a per-project basis.


    4. Employees should carefully document their employment agreements with employers by maintaining any relevant contracts and noting any related communications regarding payment obligations.

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The U.S. Supreme Court just issued a ruling that may have far-reaching implications for employers who pay their employees on a day rate basis. The court held that employees who are paid on a “day rate” basis are entitled to overtime pay, regardless of the hours they worked in any given day. Here's what employers need to know about this new ruling.


What is the “Day Rate” System?


Under the so-called “day rate” system, an employee is paid an agreed-upon daily wage regardless of how many hours he or she worked that day. In some cases, this can be beneficial for both employers and employees since it allows them to work around unexpected schedules without having to worry about tracking hours or renegotiating a salary agreement each time there is a change.


Who Does This Ruling Apply To?


This ruling from the U.S Supreme Court applies to anyone who is being paid on a “day rate” basis and is working more than forty hours per week, according to The New York Times. That means if your business employs anyone who works more than eight hours a day and does not receive overtime pay, then you must adjust your compensation policy accordingly or face potential legal action from either current or former employees.


What Steps Can Employers Take To Comply?


Fortunately, there are steps employers can take to comply with the ruling while still giving their employees flexibility and keeping labor costs down. For example, employers can choose to cap weekly work hours at 40 but also offer additional available working opportunities so employees stay engaged during off times. Employers should also review existing compensation practices and be open to adjusting salaries accordingly as part of their compliance efforts.


The Bottom Line


Employers should take this U.S Supreme Court ruling very seriously as failing to comply could result in costly legal action from current or former employees who believe they are owed unpaid overtime wages. Taking proactive steps now by reviewing policies and salaries will ensure your business remains in compliance with applicable laws related to overtime pay for those paid on a “day rate” basis.

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