What is a Day Rate Employee?
A day-rate employee is typically paid a fixed amount for each day worked, regardless of the number of hours worked in that day. This arrangement is common in certain industries, such as construction, oil and gas, and other sectors where work hours may fluctuate significantly.
Overtime Pay for Day Rate Employees
Under the Fair Labor Standards Act (FLSA), most employees are entitled to overtime pay at one and one-half times their regular rate of pay for any hours worked over 40 in a workweek, regardless of how they are paid—hourly, salary, commission, or day rate. Simply paying an employee a day rate does not exempt them from overtime requirements.
Employees who are compensated on a day rate basis are often told by their employers that they are not entitled to overtime pay because they are paid a day rate. However, a Supreme Court decision has confirmed that employees paid under a day rate basis are entitled to overtime pay.
The pivotal case addressing overtime for day rate employees is Helix Energy Solutions Group, Inc. v. Hewitt. In this 2023 Supreme Court decision, the Court ruled that a highly compensated employee paid exclusively on a day rate was still entitled to overtime pay under the Fair Labor Standards Act (FLSA).
In the Helix case, the employee was paid a day rate ranging from over $900 per day to over $1300 per day. The company contended that the employee’s pay structure should be considered a salary because his day rate amount was higher than the minimum salary required for salaried overtime exemptions ($455 per week at the time the case was filed). The court dismissed this argument, pointing out that the goal of the FLSA is to keep an employer from paying neither a true salary nor overtime to workers.
The Court emphasized that simply earning a high income or being paid a daily rate does not satisfy the FLSA’s salary basis requirement for exemption. This case clarified that, unless an employee meets all the criteria for exemption—including being paid on a true salary basis—day rate workers must receive overtime for hours worked beyond 40 in a workweek.
Calculating Overtime for Day Rate Employees
- Determine the Regular Rate: Divide the total pay for the week (based on the day rate and days worked) by the total number of hours worked that week.
- Calculate Overtime Pay: Since the day rate pay covers the regular straight time pay for all hours worked, the employee must be paid the additional half-time pay for the hour over 40. This is calculated by multiplying one-half the regular rate (calculated above) times the overtime hours.
For example, if a day-rate employee works 6 days at $200 per day and works 50 hours for the week, their pay would be calculated as follows:
- Total day rate earnings = 6 days x $200 = $1,200
- Regular rate = $1,200 / 50 hours = $24 per hour
- Overtime pay for 10 hours (hours over 40) = 10 x ($24 x 0.5) = $120 (in addition to the straight-time pay already included in the day rate)
- Total weekly pay due = $1200 + $120 = $1320
Exemptions and Special Cases
Some employees may be classified as “exempt” from overtime pay under specific criteria set by the FLSA. The most common overtime exemptions are the Executive, Administrative, and Professional exemptions. If an employee is non-exempt, they are entitled to overtime pay even if paid on a day rate.
Key Takeaways
- Being paid a day rate does not automatically make an employee exempt from overtime pay.
- Non-exempt day rate employees are entitled to overtime pay for hours worked over 40 in a workweek.
Conclusion
Employees paid on a day rate basis are generally entitled to overtime pay unless they fall under a specific exemption. If you are paid on a day rate basis and you are not being paid overtime pay when you work over 40 hours per week, you should contact The Lore Law Firm for a free confidential review. There are strict time limits under the overtime pay laws so waiting could prevent you from recovering all of the overtime pay you may be due.
