548.200—Requirements.
The following conditions must be satisfied if a “basic” rate is to be considered proper under section 7(g)(3) and subpart A of this part.
(a) Agreement or understanding.
There must be an agreement or understanding establishing a basic rate or rates. This agreement must be arrived at before performance of the work to which it is intended to apply. It may be arrived at directly with the employee or through his representative. The “basic” rate method of computing overtime may be used for as many of the employees in an establishment as the employer chooses, provided he has reached an agreement or understanding with these employees prior to the performance of the work. 3
Code of Federal Regulations
Footnote(s): 3 The records which an employer is required to maintain and preserve for an employee compensated for overtime hours on the basis of a basic rate are described in §§ 516.5(b)(5) and 516.21 of this subchapter.
(b) The rate.
The established basic rate may be a specified rate or a rate which can be derived from the application of a specified method of calculation. For instance, under certain conditions the Regulations permit the use of the daily average hourly earnings of the employee as a basis for computing daily overtime. 4 Thus, a method rather than a specific rate is authorized. Also, under certain conditions, the cost of a single meal a day furnished to employees may be excluded from the computation of overtime pay. 5 It is the exclusion of the cost of the meals that is authorized and each employee's rate of pay, whatever it may be—an hourly rate, a piece rate or a salary—is his basic rate.
Code of Federal Regulations
Footnote(s): 4 See § 548.302 .
Code of Federal Regulations
Footnote(s): 5 See § 548.304 .
(c) Minimum wage.
The employee's average hourly earnings for the workweek (exclusive of overtime pay and other pay which may be excluded from the regular rate) 6 and the established basic rate used to compute overtime pay may not be less than the legal minimum. 7
Code of Federal Regulations
Footnote(s): 6 See §§ 778.200 through 778.225 of this chapter for further discussion of what payments may be excluded.
Code of Federal Regulations
Footnote(s): 7 The legal minimum is the highest rate required by the Fair Labor Standards Act or other Federal, State or local law.