24.16.2516 EXTRA COMPENSATION PAID FOR OVERTIME
(1) Overtime premiums - general.
(a) Certain premium payments made by employers for work in excess of or outside of specified daily or weekly standard work periods or on certain special days are regarded as overtime premiums. In such case, the extra compensation provided by the premium rates need not be included in the employee's regular rate of pay for the purpose of computing overtime compensation due. Moreover, this extra compensation may be credited towards the overtime payments required by the Law.
(b) The three types of extra premium payments which may thus be treated as overtime premiums for purposes of the Law are discussed in detail in the subsections following.
(c) The extra compensation provided by these three types of payments may be credited toward overtime compensation due for work in excess of the applicable maximum hours standard. No other types of remuneration for employment may be so credited.
(2) Premium pay for hours in excess of a daily or weekly standard.
(a) Hours in excess of 8 per day or statutory weekly standard. Many employment contracts provide for the payment of overtime compensation for hours worked in excess of 8 per day or 40 per week. Under some contracts such overtime compensation is fixed at one and one-half times the base rate; under others the overtime rate may be greater or less than one and one-half times the base rate. If the payment of such contract overtime compensation is in fact contingent upon the employee's having worked in excess of 8 hours in a day or in excess of the number of hours in the workweek specified as the weekly maximum, the extra premium compensation paid for the excess hours is excludable from the regular rate and may be credited toward statutory overtime payments. In applying these rules to situations where it is the custom to pay employees for hours during which no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause, it is permissible (but not required) to count these hours as hours worked in determining the amount of overtime premium pay due for hours in excess of 8 per day or the applicable maximum hours standard, which may be excluded from the regular rate and credited toward the statutory overtime compensation.
(b) Hours in excess of normal or regular working hours. Similarly, where the employee's normal or regular daily or weekly working hours are greater or less than 8 hours and 40 hours respectively and his contract provides for the payment of premium rates for work in excess of such normal or regular hours or work for the day or week (such as 7 in a day or 35 in a week) the extra compensation provided by such premium rates, paid for excessive hours, is a true overtime premium to be excluded from the regular rate and it may be credited towards overtime compensation due under the Law.
(c) Premiums for excessive daily hours. If an employee whose maximum hours standard is 40 hours is hired at the rate of $3.00 an hour and receives, as overtime compensation under his contract, $3.50 per hour for each hour actually worked in excess of 8 per day (or in excess of his normal or regular daily working hours) , his employer may exclude the premium portion of the overtime rate from the employee's regular rate and credit the total of the extra 50 cent payments thus made for daily overtime hours against the overtime compensation which is due under the statute for hours in excess of 40 in that workweek. If the same contract further provided for the payment of $4.00 for hours in excess of 12 per day, the extra $1 payments could likewise by credited toward overtime compensation due under the Law. To qualify as overtime premiums, the daily overtime premium payments must be made for hours in excess of 7 hours per day or the employee's normal or regular working hours. If the normal workday is artificially divided
into a "straight time" period to which one rate is assigned, followed by a so-called "overtime" period for which a higher "rate" is specified, the arrangement will be regarded as a device to contravene the statutory purposes and the premiums will be considered part of the regular rate.
(d) Hours in excess of other statutory standard. Where payment at premium rates for hours worked in excess of a specified daily or weekly standard is made pursuant to the requirements of another applicable statute, the extra compensation provided by such premium rates will be regarded as a true overtime premium.
(e) Premium pay for sixth or seventh day worked. Extra premium compensation paid pursuant to contract or statute for work on the sixth or seventh day worked in the workweek is regarded in the same light as premiums paid for work in excess of the applicable maximum hours standard or the employee's normal or regular workweek.
(3) Premium pay for work on Saturdays, Sundays, and other "special days".
(a) Extra compensation provided by a premium rate of at least time and one-half which is paid for work on Saturdays, Sundays, holidays, or regular days of rest or on the sixth or seventh day of the workweek (hereinafter referred to as "special days") may be treated as an overtime premium for the purposes of the Law. If the premium rate is less than time and one-half, the extra compensation provided by such rate must be included in determining the employee's regular rate of pay and cannot be credited toward statutory overtime due.
(b) "Special day" rate must be at least time and one-half to qualify as overtime premium: The premium rate must be at least "one and one-half times the rate established in good faith for like work performed in nonovertime hours on other days". Where an employee is hired on the basis of a salary for a fixed workweek or at a single hourly rate of pay, the rate paid for work on "special days" must be at least time and one-half his regular hourly rate in order to qualify as overtime premium. If the employee is a pieceworker or if he works at more than one job for which different hourly or piece rates have been established and these are bona fide rates applicable to the work when performed during nonovertime hours, the extra compensation provided by a premium rate of at least one and one-half times either;
(i) the bona fide rate applicable to the type of job the employee performs on the "special days", or
(ii) the average hourly earnings in the week in question will qualify as an overtime premium under this section.
(c) Bona fide base rate required: The regulations authorizes such premiums paid for work on "special days" to be treated as overtime premiums only if they are actually based on a "rate established in good faith for like work performed in nonovertime hours on other days". This phrase is used for the purpose of distinguishing the bona fide
employment standards from fictitious schemes and artificial or evasive devices. Clearly, a rate which yields the employees less than time and one-half the minimum rate prescribed by the law would not be a rate established in good faith.
(d) Work on the specified "special days": To qualify as an overtime premium, the extra compensation must be paid for work on the specified days. The term "holiday" is read in its ordinary usage to refer to those days customarily observed in the community in celebration of some historical or religious occasion. A day of rest arbitrarily granted to employees because of lack of work is not a "holiday" within the meaning of this section, nor is it a "regular day of rest". The term "regular day of rest" means a day on which the employee in accordance with his regular pre-arranged schedule is not expected to report for work. In some instances the "regular day of rest" occurs on the same day or days each week for a particular employee; in other cases, pursuant to a swing shift schedule, the scheduled day of rest rotates in a definite pattern, such as 6 days of work followed by 2 days of rest. In either case the extra compensation provided by a premium rate for work on such scheduled days of rest (if such rate is at least one and one-half times the bona fide rate established for like work during nonovertime hours on other days) may be treated as an overtime premium and thus need not be included in computing the employee's regular rate of pay and may be credited toward overtime payments due under the Law.
(e) Payments of premiums for work performed on the "special day". To qualify as an overtime premium, the premium must be paid because work is performed on the days specified and not for some other reason which would not qualify the premium as an overtime premium. (For examples distinguishing pay for work on a holiday from idle holiday pay) . Thus a premium rate paid to an employee only when he received less than 24 hours notice that he is required to report for work on one of the specified days; it is a premium imposed as a penalty upon the employer for failure to give adequate notice to compensate the employee for the inconvenience of disarranging his private life. The extra compensation is not an overtime premium. It is part of his regular rate of pay.
(4) "Clock pattern" premium pay.
(a) Where a collective bargaining agreement or other applicable employment contract in good faith establishes certain hours of the day as the basic, normal, or regular workday (not exceeding 8 hours) or workweek (not exceeding the maximum hours standard applicable under section 39-3-405 MCA and provides for the payment of a premium rate for work outside such hours) , the extra compensation provided by such premium rate will be treated as an overtime premium if the premium rate is not less than one and one-half times the rate established in good faith by the contract or agreement for
like work performed during the basic, normal or regular workday or workweek.
(b) Premiums for hours outside established working hours. To qualify as an overtime premium the premium must be paid because the work was performed during hours "outside of the hours established * * * as the basic * * * workday or workweek" and not for some other reason. Thus, if the basic workday is established in good faith as the hours from 8 a.m. to 5 p.m. a premium of time and one-half paid for hours between 5 p.m. and 8 a.m. would qualify as an overtime premium. However, where the contract does not provide for the payment of a premium except for work between midnight and 6 a.m. the premium would not qualify under this section since it is not a premium paid for work outside the established workday but only for certain special hours outside the established workday, in most instances because they are undesirable hours. Similarly, where payments of premium rates for work are made after 5 p.m. only if the employee has not had a meal period or rest period, they are not regarded as overtime premiums; they are premiums paid because of undesirable working conditions.
(c) Payment in pursuance of agreement. Premiums of the type which are to be treated as overtime premiums must be paid, "in pursuance of an applicable employment contract or collective bargaining agreement," and the rates of pay and the daily and weekly work periods referred to must be established in good faith by such contract or agreement. Although as a general rule a collective bargaining agreement is a formal agreement which has been reduced to writing, an employment contract may be either written or oral. Where there is a written employment contract and the practices of the parties differ from its provisions, it must be determined whether the practices of the parties have modified the contract. If the practices of the parties have modified the written provisions of the contract, the provisions of the contract as modified by the practices of the parties will be a controlling factor in any determination. The determination as to the existence of the requisite provisions in an applicable oral employment contract will necessarily be based on all the facts, including those showing the terms of the oral contract and the actual employment and pay practices thereunder.
(5) Premiums for weekend and holiday work - example. Suppose an agreement of employment calls for the payment of $3.00 an hour for all hours worked on a holiday or on Sunday in the operation of machines by operators whose maximum hours standard is 40 hours and who are paid a bona fide hourly rate of $2.00 for like work performed during nonovertime hours on other days. Suppose further that the workweek of such an employee begins at 12:01 a.m. Sunday, and in a particular week he works a schedule of 8 hours on Sunday and on each day from Monday through Saturday, making a total of 56 hours
worked in the workweek. Tuesday is a holiday. The payment of $128.00 to which the employee is entitled under the employment agreement will satisfy the requirements of the Law since the employer may properly exclude from the regular rate the extra $8.00 paid for work on Sunday and the extra $8.00 paid for holiday work and credit himself with such amount against the statutory overtime premium required to be paid for the 16 hours worked over 40.
(6) Premiums for work outside basic workday or workweek examples. Where "clock pattern" premiums are paid may be illustrated by reference to provisions typical of the applicable collective bargaining agreements traditionally in effect between employers and employees in the longshore and stevedoring industries. These agreements specify straight time rates applicable during the hours established in good faith under the agreement as the basic, normal, or regular workday and workweek. Under one such agreement, for example, such workday and workweek are established as the first 6 hours of work, exclusive of mealtime, each day, Monday through Friday, between the hours of 8 a.m. and 5 p.m. Under another typical agreement, such workday and workweek are established as the hours between 8 a.m. and 12 noon and between 1 p.m. and 5 p.m. Monday through Friday. Work outside such workday and workweek is paid for at premium rates not less than one and one-half times the bona fide straight time rates applicable to like work when performed during the basic, normal, or regular workday or workweek. The extra compensation provided by such premium rates will be excluded in computing the regular rate at which the employees so paid are employed and may be credited toward overtime compensation due under the Law. For example, if an employee is paid $2 an hour under such an agreement for handling general cargo during the basic, normal, or regular workday and $3 per hour for like work outside of such workday, the extra $1 will be excluded from the regular rate and may be credited to overtime pay due under the Law. Similarly, if the straight time rate established in good faith by the contract should be higher because of handling dangerous or obnoxious cargo, recognition of skill differentials, or similar reasons so as to be $3 an hour during the hours established as the basic or normal or regular workday or workweek, and a premium rate of $4.50 an hour is paid for the same work performed during other hours of the day or week, the extra $1.50 may be excluded from the regular rate of pay and may be credited toward overtime pay due under the Law. Similar principles are applicable where agreements following this general pattern exist in other industries.
(7) Other types of contract premium pay distinguished.
(a) Overtime premiums are those defined by the statute. The various types of contract premium rates which provide extra compensation qualifying as overtime premiums to be excluded from the regular rate and credited toward statutory
overtime pay requirements have been described in subsections (1) through (6) of ARM 24.16.2516. The plain wording makes it clear that extra compensation provided by premium rates other than those described cannot be treated as overtime premiums are paid, they must be included in the employee's regular rate before statutory overtime compensation is computed; no part of such premiums may be credited toward statutory overtime pay.
(b) Nonovertime premiums. The Law requires the inclusion in the regular rate of such extra premiums as nightshift differentials (whether they take the form of a percent of the base rate or an addition of so many cents per hour) and premiums paid for hazardous, arduous or dirty work. It also requires inclusion of any extra compensation which is paid as an incentive for the rapid performance of work, and since any extra compensation in order to qualify as an overtime premium must be provided by a premium rate per hour. Lump sum premiums which are paid without regard to the number of hours worked are not overtime premiums and must be included in the regular rate. For example, where an employer pays 8 hours pay for a particular job whether it is performed in 8 hours or in less time, the extra premium of 2 hours pay received by an employee who completes the job in 6 hours must be included in his regular rate. Similarly, where an employer pays for 8 hours at premium rates for a job performed during the overtime hours whether it is completed in 8 hours or less, no part of the premium paid qualifies as overtime premium.
History: Sec. 39-3-403, MCA; IMP, 39-3-405 MCA; Eff. 12/31/72.