My Employer Pays Me Hourly and Pays Overtime, But Adjusts My Pay Rate Every Pay Period So I Always Make The Same Amount. Is This Legal?
In California, this arrangement for paying overtime — sometimes called a Belo contract — is not legal. A California employer cannot reduce an employee’s hourly rate of pay each pay period to effectively make the employee earn the same amount every pay period regardless of how many overtime hours he works.
The Illegal Belo Contract: John gets paid $1,000 every two-week pay period (so he makes $26,000 per year). If John were to work eight hours a day for every work day in the year, he would make $12.50 per hour. However, John’s employer makes him work 10 hours of overtime a week. Instead of paying John overtime at $18.75 per hour (1.5 times his $12.50 base hourly rate), John’s employer reduces his base rate of pay so regardless of how many hour he works he still makes $1,000 for the whole pay period. This way of paying John is illegal in California.
How Much John Should Have Made: First, you determine how much John was paid each week. Here, it’s easy: he is supposed to make $1,000 every two weeks, so one week’s worth of work would be $500. Second, you determine John’s “regular” rate of pay by taking his total pay for one week and dividing it by 40 hours. In this case, his “regular” rate of pay would be $12.50 ($500 for one week divided by 40 hours). Third, you take the ten hours of overtime he worked each week, which totals 20 hours of overtime for the pay period, and multiply it times $18.75 (1.5 times his regular rate of pay), which comes out to $187.50. In total, John should have made $187.50 in overtime each week that he worked 10 hours of overtime. If this occurred over four years (and John never missed a day of work), John could be owed as much as $39,000 in unpaid overtime.
If you have been the victim of an illegal pay scheme like this, contact Strauss & Strauss APC immediately. You may be able to go back as many as four years to reclaim the overtime hours that you should have been paid, plus penalties, interest, and more.