Paying Your Techs Legally
Most HVACR contractors know the basic rule governing overtime pay for service technicians: After working 40 hours in a week, the employee must be paid “time and a half” for the excess hours. But while this rule seems simple, the overtime regulations enforced by the U.S. Department of Labor (DOL) are anything but, especially when applied to the service-oriented HVACR industry.
For example, should a service tech’s travel time from home to the first jobsite be included in the employee’s working time? And, do you have to include bonus payments in the calculation of overtime pay? These and other common questions raised by HVACR contractors fall into two major categories:
1. What time must be included in an employee’s total hours worked, or “working time.”
2. How to properly calculate overtime compensation.
What’s Included In “Working Time”Since overtime pay is only required when the total hours worked in a workweek exceeds 40, it is important to know what hours must be included in an employee’s compensable “working time.” The general rule of thumb is that time spent by the employee that is of primary benefit to the employer should be treated as working time and, therefore, must be included in any overtime calculations. Thus, travel time between jobs, time spent at mandatory training sessions, and time spent completing job-related paperwork all must be included in the total hours worked by the employee.
Travel time from the service tech’s home to the first jobsite, according to a DOL opinion letter, should be treated as working time only if the employer provides the vehicle and requires the employee to take the vehicle home. If the employee is not required to take the vehicle home but does so for convenience, then travel time from home to the first jobsite is not treated as working time. Note that the courts are not bound by DOL opinion letters, and this issue may be resolved differently if it is litigated in federal or state court.
“Waiting time” and “on-call time” may be treated as working time, especially when the employee is waiting or on call at the employer’s worksite or at a job location. If the employee is at home, the time need not be treated as working time, since the employee is free to engage in personal activities while waiting or on call. Lunch and meal breaks are covered by special rules. Lunch breaks of 30 minutes or more need not be counted as working time, but rest breaks of 20 minutes or less must be.
How Do I Calculate Overtime Pay?Overtime pay must be calculated separately for each workweek. Here’s how the federal regulations require you to do it:
1. Calculate the total compensation paid to the employee during the workweek.
2. Calculate the total number of hours worked by the employee during the workweek. (Keep in mind the rules discussed above.)
3. Divide the total compensation (Step 1) by the total number of hours worked (Step 2). This figure is termed the “regular rate of pay.”
4. Calculate the “overtime rate” by multiplying the “regular rate of pay” (Step 3) by 0.5.
5. The overtime pay owed to an employee is the number of hours worked in excess of 40 multiplied by the overtime rate (Step 4).
This method also applies if the employee is paid both a piece rate and a nonpiece rate during the same workweek. For example, suppose an employee works 30 hours doing piecework and earns $600, and in the same week works 15 hours doing maintenance work at $10 per hour.
Total compensation (Step 1) for this employee is $750 ($600 + $150). Dividing that amount by the total hours worked, or 45 hours (Step 2), gives a figure of $16.66 per hour (Step 3). This is the employee’s “regular rate of pay” for the workweek. The employee’s overtime rate is 0.5 times this amount, or $8.33 (Step 4). The employee’s overtime compensation is the overtime rate, $8.33, multiplied by 5 (hours in excess of 40), for a total of $41.65.
What about bonuses?
Performance or incentive bonuses must be included in an employee’s total compensation (Step 1) if they are pursuant to any prior agreement or promise. However, bonuses that are in the nature of a gift, such as an annual Christmas bonus, need not be included in the calculation. In addition, unless the employer has adopted a different policy, hours attributed to an employee’s vacation, holiday, or sick leave need not be included in the overtime calculation.
These are just some of the questions that confront HVACR contractors in determining overtime compensation for service techs. Contractors should also be sure to consult state regulations that may differ from the federal requirements. For example, in California, overtime must be paid after an employee works eight hours in one day. Since violators may be subject to civil and criminal penalties, as well as employee lawsuits, contractors may wish to seek legal advice to ensure full compliance with all applicable state and federal laws governing overtime pay.
More On Overtime Rules: For the first time in nearly 50 years, the U.S. Department of Labor (DOL) has proposed revisions to the exemptions to the federal overtime laws for non-manual workers — the so-called “white collar exemptions.” In an upcoming issue of The News, Baulig will summarize the DOL revisions and address issues of concern to HVACR employers.
Baulig can be reached by e-mail at firstname.lastname@example.org.
Publication date: 05/26/2003