FLSA "Per Diem" Claims On The Rise

by Fisher Phillips
Contact

A recent U.S. Labor Department press release highlights a growing area of scrutiny under the federal Fair Labor Standards Act: Paying "per diem" amounts to non-exempt employees.

USDOL recently announced that a labor recruiting/staffing company catering to oilfield services and maritime fabrication facilities along the Gulf Coast had agreed to pay over $1.6 million to more than 1,500 current and former employees. This resulted from USDOL's investigative determination that "per diem" sums (the exact nature of which was not described in the release) were wages that the employer should have included in its calculations of the recipients' overtime premium pay.

Reimbursements, "Per Diem", And The "Regular Rate"

A non-exempt employee's FLSA overtime compensation must be based upon his or her "regular rate" of pay. This is not necessarily just the employee's stated hourly rate or other straight-time wage. Instead, it also includes all "remuneration for employment" that is not otherwise excludable from the regular rate.

One such exclusion deals with "reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer's interests and properly reimbursable by the employer...." 29 U.S.C. 207(e)(2). USDOL interprets this to refer to reimbursements that reasonably approximate the sums an employee expends on the employer's behalf and for its benefit. See, e.g., 29 C.F.R. § 778.217. For example, if an employer reimburses an employee for airfare and lodging expenses that the employee incurs in traveling to perform work away from his or her regular workplace, this reimbursement is probably excludable from the FLSA regular rate.

"Per diem" amounts falling within these parameters are not the problem. But employers attach this label to an endless variety of payments and arrangements. Potential liability arises when, because of its nature or its amount, such a sum does not fit the exclusion.

So How Might This Happen?

One illustration of this might be a situation in which an employee receives a "per diem" payment of $50 or $100 for each workday but seldom or never incurs any properly-reimbursable work-related expenses. Another example would be circumstances in which the "per diem" amount is disproportionately large as compared to the expenses that the employee typically incurs.

Also, USDOL's enforcement position is that "per diem" payments based on an employee's number of hours worked should be included in the regular rate. It is not obvious that this always squares with USDOL's acknowledgement elsewhere that employers may make "proportionate" payments when an employee is working away from home for part of a workday. Nevertheless, making "per diem" payments on an hourly basis might be especially vulnerable to attack.

To see how "per diem" payments can affect FLSA overtime compensation, assume that an employee's hourly rate is $20, that he receives a regular weekly "per diem" payment of $200, and that his work never requires him to incur expenses or other costs on his employer's behalf or for its benefit. Assume also that, in a particular workweek, this employee worked a total of 50 hours.  It is likely that USDOL or a court would deem the employee's FLSA regular rate for that workweek to be, not $20 per hour, but instead:

[(50 hrs. × $20 per hr.) + ($200 "per diem")] = $1,200

($1,200 ÷ 50 hrs.) = $24 per hour.

The employee's overtime premium due would therefore be [($24 ÷ 2) × 10 OT hrs.] = $120.  His total pay FLSA due for the workweek is therefore ($1,200 + $120) = $1,320. Under this analysis, paying the employee only [(40 ST hrs. × $20) + (10 OT hrs. × 1.5 × $20)] = $1,100 would mean that he has received ($1,320 - $1,100) = $220 less than the FLSA requires.

The Bottom Line

This latest USDOL "per diem" enforcement action involves an unusually large dollar amount, but it is just one of many such investigative efforts in recent times.  Moreover, an increasing number of FLSA lawsuits brought by private plaintiffs now include similar claims. Employers making "per diem" payments should immediately review their practices in this regard, both under the FLSA and under any applicable wage-hour requirements of other laws and other jurisdictions.

These matters can also implicate various tax laws. We have previously written about USDOL's enforcement pacts with the U.S. Internal Revenue Service and with a number of states. One thing we observed was that USDOL's understanding with the IRS appeared to be open-ended. Against this background, it is worth noting the passage in USDOL's press release that, "[p]ursuant to the department’s partnerships with the IRS and the Louisiana Workforce Commission, this case has also been referred to those agencies for review under their respective laws."

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fisher Phillips | Attorney Advertising

Written by:

Fisher Phillips
Contact
more
less

Fisher Phillips on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.