(a) Section 548.3(b) authorizes as an established basic rate: ``A
rate per hour which is obtained by averaging the earnings, exclusive of
payments described in paragraphs (1) through (7) of section 7(e) of the
act, of the employee for all work performed during the workday or any
other longer period not exceeding sixteen calendar days for which such
average is regularly computed under the agreement or understanding. Such
a rate may be used to compute overtime compensation for all the overtime
hours worked by the employee during the particular period for which the
earnings average is computed.''
(b)(1) The ordinary method of computing overtime under the act is at
the employee's regular rate of pay, obtained by averaging his hourly
earnings for each workweek. Section 548.3(b) authorizes overtime to be
computed on the basis of the employee's average hourly earnings for a
period longer or shorter than a workweek. It permits the payment of
overtime compensation on the basis of average hourly earnings for a day,
a week, two weeks or any period up to 16 calendar days, if the period is
established and agreed to with the employee prior to the performance of
the work. 9 The agreement or understanding may contemplate
that the basic rate will be the average hourly earnings for a day or a
specified number of days within the sixteen day limit, or it may provide
that the basic rate will be the average hourly earnings for the period
required to complete a specified job or jobs.
---------------------------------------------------------------------------
9 Averaging over periods in excess of 16 calendar days
may in appropriate cases be authorized by the Administrator under
Sec. 548.4.
Example 1. An employee is employed on a piece-work basis with
overtime after 8 hours a day and on Saturday. Ordinarily his overtime
compensation would be computed by averaging his earnings for the entire
workweek to arrive at the regular rate of pay and then computing the
overtime compensation due. Under this subsection of the regulations the
employer and the employee may agree to compute overtime on the basis of
the average hourly earnings for each day. Similarly, in a situation
involving a bi-weekly or a semi-monthly pay period the employer may find
it convenient to compute overtime on the basis of the average hourly
earnings for the bi-weekly or semi-monthly period. 10
---------------------------------------------------------------------------
10 See Sec. 548.301 (c) for a discussion of the method of
computing overtime for an employee paid on a semi-monthly basis.
---------------------------------------------------------------------------
Example 2. An employee, who normally would come within the forty
hour provision of section 7(a) of the Act, is paid a fixed amount of
money for the completion of each job. Each job takes 2 or 3 days to
complete. Under the employment agreement, the employee is entitled to
time and one-half an authorized basic rate for all hours worked in
excess of forty in the workweek. The authorized basic rate is the
employee's average hourly earnings for each job. Suppose he completes
two jobs in a particular workweek and all his overtime hours are on job
No. 2. The employee's average hourly earnings on job No. 2 may be used
to compute his overtime pay.
(2) In this connection it should be noted that although the basic
rate is obtained by averaging earnings over a period other than a
workweek the number of overtime hours under the act must be determined
on a workweek basis.
(c) In computing the basic rate under Sec. 548.3(b), the employer
may exclude from the computation the payments which he could exclude in
computing the ``regular'' rate of pay. 11
---------------------------------------------------------------------------
11 See Secs. 778.200 through 778.225 of this chapter for an
explanation of what payments may be excluded.
---------------------------------------------------------------------------
[20 FR 5681, Aug. 6, 1955, as amended at 26 FR 7731, Aug. 18, 1961]
