(a) Under some employment agreements employees are paid according to
a job or task rate without regard to the number of hours consumed in
completing the task. Such agreements take various forms but the two most
usual forms are the following:
(1) It is determined (sometimes on the basis of a time study) that
an employee (or group) should complete a particular task in 8 hours.
Upon the completion of the task the employee is credited with 8
``hours'' of work though in fact he may have worked more or less than 8
hours to complete the task. At the end of the week an employee entitled
to statutory overtime compensation for work in excess of 40 hours is
paid at an established hourly rate for the first 40 of the ``hours'' so
credited and at one and one-half times such rate for the ``hours'' so
credited in excess of 40. The number of ``hours'' credited to the
employee bears no necessary relationship to the number of hours actually
worked. It may be greater or less. ``Overtime'' may be payable in some
cases after 20 hours of work; in others only after 50 hours or any other
number of hours.
(2) A similar task is set up and 8 hours' pay at the established
rate is credited for the completion of the task in 8 hours or less. If
the employee fails to complete the task in 8 hours he is paid at the
established rate for each of the first 8 hours he actually worked. For
work in excess of 8 hours or after the task is completed (whichever
occurs first) he is paid one and one-half times the established rate for
each such hour worked. He is owed overtime compensation under the Act
for hours worked in the workweek in excess of 40 but is paid his weekly
overtime compensation at the premium rate for the hours in excess of 40
actual or ``task'' hours (or combination thereof) for which he received
pay at the established rate. ``Overtime'' pay under this plan may be due
after 20 hours of work, 25 or any other number up to 40.
(b) These employees are in actual fact compensated on a daily rate
of pay basis. In plans of the first type, the established hourly rate
never controls the compensation which any employee actually receives.
Therefore, the established rate cannot be his regular rate. In plans of
the second type the rate is operative only for the slower employees who
exceed the time allotted to complete the task; for them it operates in a
manner similar to a minimum hourly guarantee for piece workers, as
discussed in Sec. 778.111. On such days as it is operative it is a
genuine rate; at other times it is not.
(c) Since the premium rates (at one and one-half times the
established hourly rate) are payable under both plans for hours worked
within the basic or normal workday (if one is established) and without
regard to whether the hours are or are not in excess of 8 per day or 40
per week, they cannot qualify as overtime premiums under section 7(e)
(5), (6), or (7) of the Act. They must therefore be included in the
regular rate and no part of them may be credited against statutory
overtime compensation due. Under plans of the second type, however,
where the pay of an employee on a given day is actually controlled by
the established hourly rate (because he fails to complete the task in
the 8-hour period) and he is paid at one and one-half times the
established rate for hours in excess of 8 hours actually worked, the
premium rate paid on that day will qualify as an overtime premium under
section 7(e)(5).
