The following conditions must be satisfied if a ``basic'' rate is to
be considered proper under section 7(g)(3) and subpart A of this part.
(a) Agreement or understanding. There must be an agreement or
understanding establishing a basic rate or rates. This agreement must be
arrived at before performance of the work to which it is intended to
apply. It may be arrived at directly with the employee or through his
representative. The ``basic'' rate method of computing overtime may be
used for as many of the employees in an establishment as the employer
chooses, provided he has reached an agreement or understanding with
these employees prior to the performance of the work. 3
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3 The records which an employer is required to maintain and
preserve for an employee compensated for overtime hours on the basis of
a basic rate are described in Secs. 516.5(b)(5) and 516.21 of this
subchapter.
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(b) The rate. The established basic rate may be a specified rate or
a rate which can be derived from the application of a specified method
of calculation. For instance, under certain conditions the Regulations
permit the use of the daily average hourly earnings of the employee as a
basis for computing daily overtime. 4 Thus, a method rather
than a specific rate is authorized. Also, under certain conditions, the
cost of a single meal a day furnished to employees may be excluded from
the computation of overtime pay. 5 It is the exclusion of the
cost of the meals that is authorized and each employee's rate of pay,
whatever it may be--an hourly rate, a piece rate or a salary--is his
basic rate.
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4 See Sec. 548.302.
5 See Sec. 548.304.
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(c) Minimum wage. The employee's average hourly earnings for the
workweek (exclusive of overtime pay and other pay which may be excluded
from the regular rate) 6 and the established basic rate used
to compute overtime pay may not be less than the legal minimum. 7
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6 See Secs. 778.200 through 778.225 of this chapter for
further discussion of what payments may be excluded.
7 The legal minimum is the highest rate required by the
Fair Labor Standards Act or other Federal, State or local law.
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[20 FR 5680, Aug. 6, 1955, as amended at 21 FR 338, Jan. 18, 1956]
