Is Paying A Day Rate Legal?
Employers in various industries, such as construction, roofing, landscaping, as well as those involved in production, maintenance, and/or cleaning services often use a day rate model to pay their employees. Over the years, both employers and employees have come to FairLaw Firm and asked if it was legal to pay a worker a set amount for each day of work (such as $120/day).
As a lawyer, my usual response is “it depends” – I mean, what else would a lawyer say without more information.
An employer can legally pay a worker a set amount for each day of work (known as a “day rate”) under certain – but not all – circumstances. One of the most important factors to consider is not necessarily the “day rate” itself, but the amount paid to the worker / employee over the course of a week and how many hours were worked during that week.
I find that employers normally run into trouble when they pay a “day rate” but do not keep track of the hours worked each day. Not keeping track of the hours worked each would certainly be a recordkeeping problem if the Department of Labor conducts an investigation. The other, and bigger problem, is that not keeping track of the hours actually worked can lead to the potential for minimum wage and/or overtime pay violations.
Minimum Wage Considerations
Most employees must be paid at least a minimum wage for each hour worked. To figure out if an employee is paid a least the applicable minimum wage for each hour worked over the course of a week, simply add up the total amount that the employer paid to the employee over the course of a week and divide that number by the hours worked by the employee that week.
If the employee receives $120/day and works 5 days each week, then the employee receives $600/week. If that same employee normally works 40 hours per week, then the employer has paid the employee $15/hour. In Florida, paying an employee at the rate of $15/hour exceeds the applicable minimum wage (until January 1, 2026, when that amount would equal the scheduled increase in Florida’s minimum wage to $15/hour).
If that same employee earns $120/day and works 5 days each week, then the employee would still receive $600/week. If that same employee works 75 hours in one or more workweeks, then the employer has paid the employee at a rate of $8.00/hour. Although paying an employee at a rate of $8.00/hour is legal under federal law (which imposes a $7.25/hour minimum wage as of the writing of this post), paying the rate of $8.00/hour would not be legal under Florida law – since the applicable Florida minimum wage has exceeded $8.00/hour for quite some time.
The take-away here is that paying an employee a “day rate” may or may not result in a problem with paying minimum wages.
Overtime Wage Considerations
Most employees must also receive overtime pay calculated at one and one-half times their regular rate of pay for each hour they work beyond 40 in a workweek. To figure out if an employee is owed overtime here, an employer must ensure that the employee has not worked more than 40 hours within a seven (7) day workweek. If an employee worked more than 40 hours in a workweek, then the same analysis is done to determine the employee’s regular hourly rate by dividing the total pay for the week by the total hours worked by the employee.
If the employee receives $120/day and works 5 days each week, then the employee receives $600/week. If that same employee normally works 40 hours per week, then the employer has paid the employee $15/hour for each of the 40 hours worked, and there would be no problem with overtime pay because none was owed.
If the employee receives $120/day and works 5 days each week, then the employee receives $600/week. If that same employee normally works 50 hours per week, then the employer has paid the employee $12/hour for each of the 50 hours worked. That employee would then be owed an additional $6/hour for each of the 10 overtime hours worked during that particular week. Simply paying a “day rate” in this situation could be a problem for the employer, because it may owe the employee overtime wages.
FairLaw Firm has the experience necessary to address situations in which an employer pays an employee a “day rate”. FairLaw Firm has counseled employers about how to continue to legally pay a “day rate” without running into problems. FairLaw Firm also has represented employees in lawsuits involving “day rate” pay that violated the law.
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