Department of Labor Cracks Down on "Per Diem" Payments that Are Improperly Excluded from Overtime Calculations
According to a recent U.S. Department of Labor (“DOL”) press release, the agency is combating employers’ misuse of “per diem” (per day) pay rates as means of decreasing employees’ overtime pay. The DOL’s crackdown is focused on temporary staffing agencies in the southwest.
The ongoing initiative has already resulted in a $1.6 million settlement with B&D Consulting, Inc., a labor recruiting and staffing agency that provides temporary workers for Gulf Coast-area oil field services and maritime fabrication operations. The settlement recovers back wages for approximately 1,500 current and former employees. The DOL found that the company kept improper records and engaged in impermissible pay practices in violation of the Fair Labor Standards Act (“FLSA”). Per the department press release, the company mischaracterized certain wages as per diem payments, then improperly excluded those wages when calculating overtime premiums, denying employees their earned overtime compensation.
“The labor violations we found in this case are not unique to B & D Contracting Inc.,” said Cynthia Watson, regional administrator for the DOL’s Wage & Hour Division in the Southwest. “We are increasingly finding the use of per diem schemes as a means of decreasing overtime pay and tax obligations in the staffing and support services industry in this region. The resolution of this case demonstrates our continued focus on combating such labor violations in order to improve compliance in this industry.”
Overtime must be calculated on an employee’s regular rate of pay, which includes all wages for employment, but may exclude certain payments under the FLSA such as reimbursement for work-related expenses. Reimbursements for travel or other work-related expenses may be excluded from overtime calculations based on the employee’s regular rate of pay. But, where an employee receives such “reimbursements” or similar payments but actually incurs no such additional expenses, such payments do not constitute true reimbursements and must be included in the regular rate of pay for purposes of calculating an employee’s overtime compensation.
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