(a) To qualify under section 7(f), the contract must specify ``a
regular rate of pay of not less than the minimum hourly rate provided in
subsection (a) or (b) of section 6 (whichever may be applicable).'' The
word ``regular'' describing the rate in this provision is not to be
treated as surplusage. To understand the nature of this requirement it
is important to consider the past history of this type of agreement in
the courts. In both of the two cases before it, the Supreme Court found
that the relationship between the hourly rate specified in the contract
and the amount guaranteed was such that the employee in a substantial
portion of the workweeks of the period examined by the court worked
sufficient hours to earn in excess of the guaranteed amount and in those
workweeks was paid at the specified hourly rate for the first 40 hours
and at time and one-half such rate for hours in excess of 40 (Walling v.
A. H. Belo Company, 316 U.S. 624, and Walling v. Halliburton Oil Well
Cementing Company, 331 U.S.17). The fact that section 7(f) requires that
a contract, to qualify an employee for exemption under section 7(f),
must specify a ``regular rate,'' indicates that this criterion of these
two cases is still important.
(b) The regular rate of pay specified in the contract may not be
less than the applicable minimum rate. There is no requirement, however,
that the regular rate specified be equal to the regular rate at which
the employee was formerly employed before the contract was entered into.
The specified regular rate may be any amount (at least the applicable
minimum wage) which the parties agree to and which can reasonably be
expected to be operative in controlling the employee's compensation.
(c) The rate specified in the contract must also be a ``regular''
rate which is operative in determining the total amount of the
employee's compensation. Suppose, for example, that the compensation of
an employee is normally made up in part by regular bonuses, commissions,
or the like. In the past he has been employed at an hourly rate of $5
per hour in addition to which he has received a cost-of-living bonus
of $7 a week and a 2-percent commission on sales which averaged $70 per
week. It is now proposed to employ him under a guaranteed pay contract
which specifies a rate of $5 per hour and guarantees $200 per week, but
he will continue to receive his cost-of-living bonus and commissions in
addition to the guaranteed pay. Bonuses and commissions of this type
are, of course, included in the ``regular rate'' as defined in section
7(e). It is also apparent that the $5 rate specified in the contract is
not a ``regular rate'' under the requirements of section 7(f) since it
never controls or determines the total compensation he receives. For
this reason, it is not possible to enter into a guaranteed pay agreement
of the type permitted under section 7(f) with an employee whose regular
weekly earnings are made up in part by the payment of regular bonuses
and commissions of this type. This is so because even in weeks in which
the employee works sufficient hours to exceed, at his hourly rate, the
sum guaranteed, his total compensation is controlled by the bonus and
the amount of commissions earned as well as by the hourly rate.
(d) In order to qualify as a ``regular rate'' under section 7(f) the
rate specified in the contract together with the guarantee must be the
actual measure of the regular wages which the employee receives.
However, the payment of extra compensation, over and above the
guaranteed amount, by way of extra premiums for work on holidays, or for
extraordinarily excessive work (such as for work in excess of 16
consecutive hours in a day, or for work in excess of 6 consecutive days
of work), year-end bonuses and similar payments which are not regularly
paid as part of the employee's usual wages, will not invalidate a
contract which otherwise qualifies under section 7(f).
[33 FR 986, Jan. 26, 1968, as amended at 46 FR 7317, Jan. 23, 1981]
