Two-Hatters: Overtime and Prevailing Wages for Workers in Dual Jobs
Sometimes employees work in two different jobs with potentially two different rates of pay. These so-called dual employment situations or “two hatters”, thus, create wage and hour compliance complexities, either in overtime calculations, and/or in prevailing wage compliance situations.
Under the working time regulations set forth in the Fair Labor Standards Act (“FLSA”), the default rule is that if an employee performs “two more different types of work” in a given work week “for which different nonovertime rates of pay . . . have been established,” the regular rate of pay for that employee is equal to the weighted average of the rates of pay for the different types of work. 29 CFR § 778.115. The weighted average equals the total base-pay compensation for all hours worked divided by the total number of hours worked. For example, if an employee who works 50 hours, performs two categories of work, one of which pays $20/hour for 30 hours and the other $15/hour for 20 hours, the employee’s total base pay will be $900 across all hours of work ((30 x $20) + (20 x $15)). The weighted average rate would be $18/hour (i.e., $900/50). Accordingly, the overtime rate of pay would be $27/hour.
Alternatively, under the FLSA, the overtime rate can, by agreement, be based on the rate of pay applicable to the specific category of work being performed during the hours worked in excess of 40 hours. See 29 CFR § 778.419. Taking the example above (i.e., an employee works 50 hours), the employee would be paid 1.5 times the rate for the applicable category of work. If the employee works 7 hours in the $20/hour category and 3 hours in the $15/hour category, that employee would be paid at a rate of, respectively, $30/hour for 7 hours and $22.50/hour for the remaining 3 hours.
Given that the second method must be accomplished by agreement, the employer must obtain consent from any employee to whom it would like to apply this approach. If an employer wishes to adopt such an approach, it should provide a statement like the following wherever the company states its policy on overtime:
Overtime compensation will be paid at a rate of 1.5 times your regular rate of pay per hour for any hour worked above 40 hours in a workweek. Some employees perform different types of work and are paid a varying amount depending on the type of work being performed. The overtime compensation which must be paid to such employees shall be at a rate of 1.5 times the hourly rate applicable to the type of work that is being performed during the overtime hours.
If an employer wants to adopt this alternate methodology, it will need to alert its current employees that the employer is adopting a new overtime policy and request that employees accept the policy, preferably in writing (or electronically via an email reply or some other system customarily used by the company to make records memeorializing employee agreements regarding company policies). This is more than a simple notice requirement. It requires an affirmative assent by the employee. Of course, can in many states, an employer could make agreeing to this method of overtime a condition of employment and likely terminate an employee who refuses to agree.
In addition, to the FLSA, employers need to consider other wage and hour laws that interact with the general federal requirements. There are often state laws which may impact how employers must proceed if they are changing the employment contract, such as what kind of notice is due the workers. In addition, prevailing wage laws like the Davis-Bacon Act or the Service Contract Act (“SCA”) may also impose ancillary requirements on the employer. For example, the SCA incorporates the working time rules of the FLSA and makes them applicable to service contracts, but it also imposes additional rules. Thus, most working time pay issues in government service contracts involve an interplay and mix of these two statutes.
Under the Service Contract Act (“SCA”):
If an employee during a workweek works in different capacities in the performance of the contract and two or more rates of compensation . . . are applicable . . ., the employee must be paid the highest of such rates for all hours worked in the workweek unless it appears from the employer's records or other affirmative proof which of such hours were included in the periods spent in each class of work.
29 CFR § 4.169 (Wage payments—work subject to different rates). Thus, the SCA sets the default position at payment of the highest rate for the non-overtime hours, and time and one-half that higher rate for the overtime work. But the SCA allows for a different method if the employer can prove which hours of work were for a project or class of work the employee was engaged to perform. Accordingly, under the SCA, employers can still pay workers performing two different jobs two different rates of pay. The employer just has an enhanced recordkeeping burden.
Please note, however, that if a SCA covered worker is engaged in work the same job classification family or series, the two jobs usually cannot be separated and paid different rates, which would be allowed if only the FLSA was in the picture. If the SCA covered workers are working in the same job series/family, such as Clerk I and II, and if they do any of the duties of a Clerk II, that is what they are. The employer can’t segregate the job duties and call some part of the work Clerk I duties, because every Clerk II generally does what a Clerk I does plus some more duties of a higher nature. The SCA prevailing wage rate for the higher-level job should be paid for all hours worked, including the lesser skilled time spent laboring. It is different if they are performing work in two entirely different and unrelated job series, like Clerk I and Laborer. Then, the employer can keep track of the hours worked in each different job and pay them accordingly.
In short, if your employees wear “two hats”, take some extra care to comply with the overtime and prevailing wage laws.