Overtime Pay Laws for Day Rate Workers
“Day rate” or “daily rate” employees are paid a flat amount for each day worked, regardless of the number of hours they put in during each day. However, employers are still required by law to pay most day rate employees overtime for all hours worked in a week over 40.
Employers in many industries often pay workers as day rate employees to whom they do not pay overtime. This type of overtime violation is commonly seen in various jobs in the oil and gas and refinery maintenance industries.
Lawsuits have been brought, and back wages have been recovered, on behalf of all types of field service workers who were paid on a day-rate system, including but not limited to:
- Field Specialists,
- Field Operators,
- Pipeline Inspectors,
- Top Drive Technicians,
- Service Supervisors,
- Field Coordinators,
- Tool Pushers,
- Lease Operators,
- Mud loggers / Mud Engineers,
- Field Engineers,
- Completions Consultants,
- Drilling Consultants,
- Project Managers and
- Water Truck Drivers
A hotbed of claims for unpaid overtime has been inspectors who are paid on a day-rate basis with no overtime premium. All types of inspector jobs have been at issue, including:
- welding inspectors
- tank inspectors
- safety inspectors
- E&I inspectors
- NACE coating inspectors
- vendor inspectors
- tie-in inspectors
- directional drill inspectors
- utility inspectors
Failing to pay overtime to day-rate workers saves employers substantial amounts of payroll and can deprive a worker of tens of thousands of dollars in hard-earned overtime pay. It is well worth the effort for day-rate employees to make sure they are not being deprived of the overtime pay they are entitled to.
Calculating Overtime For Day Rate vs. Hourly Employees
To calculate overtime for a day rate employee, the first step is to multiply the amount the employee is paid for a day’s work (the “day rate”) by the number of days the employee worked in the week. Next, divide this by the total number of hours the employee worked in the week. The result is the worker’s “regular rate” for the week. Finally, the “overtime rate” is half the regular rate, which the employee is then owed for each hour worked over 40 in the week.
Calculating overtime for an hourly employee is more basic. The overtime rate is again one half the regular rate, and an hourly employee’s regular rate is the same as his hourly rate, unless he receives additional compensation under a separate payment method. For example, if a worker’s regular hourly rate is $10 per hour, their overtime pay rate is $15 per hour.
- Example: Day Rate = $150 per day. Work Days in the Workweek = 5 days. Work Hours = 60
- Regular Rate Calculation = $150 x 5 days = $750 / 60 hours = $12.50 Regular Rate
- Overtime Pay Calculation = $12.50 x 1/2 x 20 Overtime Hours = $125 Overtime Pay
- Total Pay for the Week: $750 Day Rate Earnings + $125 Overtime Pay = $875 Total Pay
In situations where employees routinely work over 40 hours per week, there are significant advantages for employers under the day rate scheme instead of the traditional hourly rate method. An hourly employee’s overtime rate does not change based on the number of overtime hours worked, but a daily rate employee’s overtime rate decreases as the number of hours an employee works increases.
Employers Often Fail to Pay Overtime to Day Rate Employees
Many employers simply refuse to pay their day rate employees overtime at all. This occurs in conglomerates with thousands of employees, small businesses and all employers in between. A number of large energy and energy service companies have recently been sued for withholding overtime from their daily rate field service workers.
Employers Misclassify Hourly Employees as Day Rate
Many employers misclassify employees paid on this rate to take advantage of this difference in overtime pay. However, to qualify as a daily rate employee, the worker must actually receive a standard sum for each day worked. The worker’s day rate cannot change based in any part on the number of hours worked. Additionally, day rate employees may receive no other form of compensation for services from the employer. While certain payments that are not related to the number of hours worked (eg. gifts, expense reimbursements, bona fide profit sharing plan payments) are permitted and do not constitute “other compensation” for purposes of the day rate calculation, many common incentives that are in some way tied to the number of hours worked will invalidate the day rate plan.
Employers Misclassify Day Rate Workers as Independent Contractors
Further misclassification of day-rate workers occurs when employers attempt to label such workers as independent contractors (a/k/a 1099s) instead of employees. This is often done when such workers are provided through a third-party staffing company.
In this scenario, workers are treated as independent contractors and paid a flat amount for each day worked (the “day-rate”) without regard to the state or federal overtime laws that should apply. Given their job duties, day-rate pay, and the fact that such workers are in no way “running their own business” – they are properly classified as employees, not independent contractors, and legally entitled to receive at least time and a-half for each hour of overtime they work.
Free & Confidential Legal Review for Employees Paid a Day Rate
If you are paid on a day rate and believe that you have been denied overtime pay or if you would like to get more information, please call us or one of our attorneys at 1-866-559-0400, email us at email@example.com or submit your information using our convenient Case Evaluation form for a FREE and CONFIDENTIAL review of your circumstances.