Non-exempt employees – what counts as wages?
June 12th, 2018 by Jill S. Kirila, Meghan E Hill and Shennan Harris at Squire Patton Boggs
This blog is an excerpt from our book Wages and Hours – An Employer's Guide by Jill S. Kirila, Meghan E. Hill and Shennan Harris at Squire Patton Boggs. For more information, go to the Products tab above and click on "Federal" to subscribe.
Under the Fair Labor Standards Act (FLSA), “wages” paid to an employee are defined to include money, but may also include “facilities” such as the reasonable cost or fair value of board, lodging, or other facilities similar to board and lodging which are customarily furnished by the employer for the employee’s benefit.
Examples of other facilities are:
- meals provided at company cafeterias
- tuition provided by a college to student employees
- general merchandise provided at company stores
- transportation provided to and from work by the employer.
The FLSA permits employers to pay wages in facilities in addition to the employee’s cash wage or as deductions from the stipulated cash wage.
In lieu of minimum wage
An employer may meet its obligation to pay minimum wage and overtime payments by furnishing board, lodging, and other facilities. An employer may not make a profit from the facilities, but may only treat the reasonable cost of the facilities as part of its minimum wage and overtime obligations.
- “Reasonable cost” is an amount not more than the employer’s actual costs plus depreciation, if applicable. If the fair value, as determined by the Department of Labor (DOL), is lower than the employer’s reasonable costs, only the fair value may be treated as wages.
An employer spends $7 per person providing a meal for its employees. If the DOL later determines the fair value of the meal is only $5, the employer will be permitted only to credit $5 toward the employee’s cash wages.
- The reasonable cost of board, lodging, and other facilities may be considered part of minimum wages and overtime only where the facilities are customarily furnished to the employee. Facilities are “customarily” furnished if they are regularly supplied by the employer to its employees or if provision of the facilities is customary for the industry.
An employer whose facility does not have easy access to restaurants provides meals to its workers. These meals are “customarily” furnished and the reasonable cost of the meal may be considered wages because they are regularly supplied.
Employers may not deduct from the minimum wage requirement the cost of furnishing facilities where the facilities are primarily for the benefit of the employer. Items which are primarily for the employer’s benefit include charges for uniform purchase or rental and medical charges required to be paid by the employer under workers’ compensation laws. Meals provided by the employer are, however, considered to be for the benefit of the employee and may be considered wages for purposes of applying toward the minimum wage. The employee’s acceptance of board, lodging, or other facilities in lieu of cash wages must be completely voluntary and not coerced.
Items not facilities
The DOL has determined the following items are not "facilities":
- shares of stock
- "dues" to chambers of commerce
- charges for rental of uniforms where the nature of the business requires the employee to wear a uniform.
Employees also may not be required to provide uniforms or tools of the trade used for an employer’s particular work where the cost of such tools would reduce payments to the employee below the required minimum wage or overtime amounts for any work week.
Methods of payment
Employees must be paid either in cash (which includes payment by check) or through board, lodging, or other facilities. While employers may use devices such as “scrip” (vouchers), coupons, or tokens to keep track of work performed, the devices must be exchangeable for cash wages at the end of the pay period.
Whether or not employees can be compelled to accept their wages by direct deposit or payment by payroll debit card (also called “paycard”) is a matter of state law.
Commonly asked questions and answers
Q. Does anything besides monetary compensation to employers count as wages?
A. Yes. “Wages” may include the reasonable costs or fair value of board, lodging, or other facilities customarily furnished by the employer for the employee’s benefit. Some examples of non-cash wages include meals at company cafeterias, tuition furnished by a college to student employees, merchandise furnished at company stores and transportation to and from work.
Q. We pay employees at least minimum wage, but also provide their housing. Do we need to take the value of the housing into account when computing the employee's overtime?
A. Yes. The FLSA requires this lodging to be included in the employee’s regular hourly rate for purposes of computing overtime. This has the effect of increasing the overtime owed. In order to compute the employee’s overtime correctly, the reasonable cost of the lodging should be considered a similar bonus. The same calculation is performed as for bonuses.
Q. What types of benefits do not count as facilities in place of wages?
A. Facilities provided primarily for the employer’s benefit. The DOL has determined that shares of stock, dues to chamber of commerce, and provision of uniforms where the employer requires employee uniforms are not facilities that may be considered wages.
This blog was written by Judy Yi at Polsinelli. Polsinelli authors hrsimple resources in Missouri, Kansas and Illinois. You can find the original blog post and their labor and employment blog Polsinelli at Work (which is excellent) on their website.
Five Issues When An Employer Is Consi...
This blog was written by Spencer Waldron at Fisher Phillips, which authors several of our resources. You can find the original post and the Employment Privacy Blog (which is excellent) on their website.
How Much Do You Really Want to Know About Your Employees? The Growing Popularity of Co...
This blog was written by Matt Anderson at Troutman Sanders, author of the Georgia Human Resources Manual. You can find the original article and their HR Law Matters blog on their website.
Who Are You?: The Legal Implications of Employee Personality Testing
Many employers require emplo...
Interviewer: So where do you see yourself in five years?
Applicant: I'd say my biggest weakness is listening.
Maybe the questions you ask haven't changed (and maybe not the answers you get either), but the process of hiring – ZipRecruiter, downloads, videos, Indeed, resume filters – has.
This blog was written by Patricia Dammann, VP Programs & Operations/OD Strategist at Institute of Organization Development. You can find the original article here.
Attracting and retaining millennials using a strategic talent management approach
It all started with a simple question...
Well, maybe he didn't necessarily write the job description, more like he personalized it.
And a personalized job description should make for a more engaged employee, n'est-ce pas?
Vivek Patel from SAP shares in the Harvard Business Review something that all of us know, whether HR specialis...
This blog was written by Natasha Sarah-Lorraine Banks at Fisher Phillips, which authors several of our resources. You can find the original here and their Wage and Hour Laws Blog here.
Hiring Minors in the Heat of the Summer: What Employers Need to Know
Summertime is quickly approachin...
This blog is courtesy of the Iowa Association of Business and Industry (ABI) and can be found on their website here.
Recently, ABI named workforce issues its number one legislative priority for the 2018 session and reported many of its members have difficulty finding qualified workers. T...
Do new hires have to be a culture club fit? Patty McCord, former chief talent officer of Netflix doesn't think so. READ THIS deep dive (3500+ words) from Patty, SHRM and Harvard Business Review.
In Patty's words: "The process requires:
probing beneath the surface of people and their ré...
Needless to say, a company can’t operate (let alone succeed) if the employees aren’t showing up to work. But how do you ensure that your workforce will consistently report for duty? One good step is having a clear attendance policy. Communicating clearly about what are acceptable reasons to miss ...
This blog is an excerpt from our book Hiring, Firing and Discipline for Employers, authored by Frank Day, Robbin Hutton and Jessica Asbridge at Ford Harrison LLP. For more state specific information, go to the Products tab above and subscribe to the Human Resources Manual for your state.
Not all employers provide employees with vacation time, but for those who do it is wise to have a clear, well-enforced policy in place to prevent confusion and help employees understand what steps need to be followed in order to use their time off. If employers decide to provide time off they nee...
Finding new employees can be stressful. Sure, an applicant will say they are a hardworking overachiever, but are they being honest? That's where reference checks come in. For most positions, it is beneficial for an employer to request and contact previous employers to check on perspective employe...
While there may be no state or federal law requiring an employer to have a handbook, there are a number or reasons why they are in an employer’s best interest.
Usefulness. It is beneficial for there to be one definitive source on the terms of employment. If an employee ever has a question ...
As an HR professional you are no stranger to paperwork. It seems that for every employment action – applying, interviewing, hiring, disciplining, on and on – there is a specific form that needs to be filled out. Making sure you complete the paperwork properly is only half the battle though. Once ...
This blog was written by Caroline Pham and Collin Cook at Fisher Phillips, which authors several of our resources. You can find the original here and their On the Front Lines Workplace Law Newsletter (which is excellent) here.
Are Your Employees “Slackers”? How Employers Should Handle Sla...
July 1 saw a number of states and localities raise the minimum wage, so our author Ogletree Deakins put together a chart for those of you who don't want to pass and go bust.
FYI – poker will be eligible for review for becoming an official Olympic sport.
This blog was written by Carol Barnett at Polsinelli. Polsinelli authors hrsimple resources in Missouri, Kansas and Illinois. You can find the original blog post here and their labor and employment blog Polsinelli at Work (which is excellent) here.
If an employer is being audited by the U...
Have your employees been going the extra mile lately? What if they’re clocking in the equivalent of a marathon in hours? If you’re looking over your timesheets and notice that your star employee racked up a whopping 55 hours last week, it’s time to get familiar with the legal requirements of over...