The U.S. First Circuit Court of Appeals, which has jurisdiction over Maine, recently ruled in an unpaid overtime case that the defendant-employer should have included per diem payments when it calculated overtime pay. In the case, Newman and Patague v. Advanced Technology Innovation Corp., Mr. Newman and Mr. Patague argued that Advanced Technology illegally excluded the per diem pay that it gave to them when it calculated their overtime pay.
Under the federal Fair Labor Standards Act, covered employers must pay non-exempt employees 1.5 times their “regular rate” of pay for all hours worked over 40 in a week. This case involved the issue of what money should be included in the regular rate of pay. This is important because the higher the regular rate of pay is, the higher the overtime pay should be. Newman and Patague argued that the money they received as per diem, which was supposedly meant to reimburse them for traveling and other expenses they incurred while working away from home, was actually part of their wages.
Advanced Technology argued that the per diem should not be counted as wages, and not be included in the “regular rate,” because it was truly just to compensate Newman and Patague for expenses they incurred while they worked away from home. The trial court accepted Advanced Technology’s argument and found in favor of the company but the First Circuit reversed the trial court’s decision. The First Circuit held that the per diem was actually part of Newman’s and Patague’s wages because the per diem varied based on the number of hours they worked. The First Circuit limited its holding, however, reasoning that per diem would not be treated as part of the “regular rate” of pay if the employer reduced it based on the number of days, instead of hours, the employee worked. So, for instance, an employer could pay half of a normal per diem for a day if the employee was only on work travel for half a day and, if it did that, the per diem would not count as wages.
Both federal and state overtime laws can be complicated. If you have questions about whether your employer is calculating your overtime pay correctly, you should contact an experienced employment lawyer to learn more about your rights. Furthermore, just because you have told your employer that you don’t mind receiving less in overtime pay than the law requires does not mean that you cannot demand that overtime pay at a later time. Otherwise, employers could just force their employees to accept less pay than the law requires and evade the overtime laws altogether.