FLSA2020-20 — Whether certain overtime payments based on an expected number of hours worked may be credited towards the amount of overtime pay owed under the Fair Labor Standards Act (FLSA) and whether such overtime payments are excludable from the regular rate

U.S. Department of Labor Wage and Hour Division
Washington, DC 20210
FLSA2020-20
December 31, 2020
Dear Name*:
This letter responds to your request for an opinion concerning your practice of paying overtime
based on an expected number of hours worked to caregiver employees who work live-in and
extended shifts of 24 hours or more for anticipated overtime hours.
1
You specifically ask whether
such overtime payments are excludable from the regular rate and may be credited towards the
amount of overtime pay owed under the Fair Labor Standards Act (FLSA or the Act). You
represent that you do not seek this opinion for any party that the Wage and Hour Division (WHD)
is currently investigating or for use in any litigation that commenced prior to your request.
BACKGROUND
You employ caregivers who provide clients with in-home care services on a live-in basis or for
shifts of 24 hours or more. A typical schedule may be 5 days per week for 120 hours or more, and
providing such services requires your caregivers to spend full days in a client’s home without
direct supervision. You state that demand for such live-in or extended shift care services has
increased during the COVID-19 pandemic because clients—most of whom are vulnerable to
COVID-19 for age and health related reasons—prefer that their caregivers remain in their home to
reduce contagion risks.
You state that it is difficult, if not impossible, to track the hours during which live-in and 24 hour
or more shift caregivers perform compensable work, as opposed to being able to use time
effectively for his or her own purposes. As such, you consider the caregivers to perform
compensable work for the entire extended shift, except that you and your caregivers agree that
bona-fide meal and sleep periods (of up to 8 hours per day) are not compensable. Any work-
related interruptions to meal or sleep periods are tracked and counted as hours worked, and the
entire sleep period is counted as hours worked if interruptions prevent the caregiver from getting
the required minimum of sleep time per day.
You pay your caregivers an hourly rate plus extra compensation that is intended as overtime pay
under the FLSA for all hours worked in excess of 40 in a workweek. The extra compensation is
equal to one-half times the hourly rate for each overtime hour worked, as required under the
FLSA. You represent that for all arrangements, a written agreement between the agency and
caregiver exists, expressly outlining the specific pay structure applicable. You and the caregivers
1
Your letter refers to payment of hours each shift at 1.5 times the regular rate as “prepayments” of overtime even
though the premium is paid in the same week in which the employee works the overtime hours. Generally,
prepayment of overtime refers to payments made in a week in which overtime is not worked that are then credited
toward future overtime compensation. Rather, your letter indicates that you calculate the amount of overtime pay
before your employees perform work, based on the expected number of hours worked, and then adjust that amount if
actual hours are greater than the expected amount. As such, you appear to pre-calculate overtime payments, which is
distinct from prepaying overtime.

2

further agree that you would pay overtime compensation based on the anticipated number of hours
that the caregiver would work each workweek. If the caregiver works more hours than
anticipated—for example, if planned meal or sleep periods were interrupted—you state that you
supplement the prepaid compensation at a rate of one and one-half times the caregiver’s hourly
rate for each unanticipated hour of work over 40 in a workweek.
GENERAL LEGAL PRINCIPLES
The FLSA requires payment “at a rate not less than one and one-half times the regular rate at
which [the employee] is employed” to all non-exempt employees for all hours worked in excess of
40 hours in a workweek. 29 U.S.C. § 207(a). Where a worker is solely paid an hourly rate, the
regular rate is equal to that hourly rate, and the overtime pay owed is equal to an additional one-
half the hourly rate for each hour worked in excess of 40 in a workweek. 29 C.F.R. § 778.110(a).
The regular rate must include “all remuneration for employment paid to, or on behalf of, the
employee,” subject to eight statutory exclusions. 29 U.S.C. § 207(e). In interpreting
“remuneration for employment” and the statutory exclusions, a “‘fair reading’ of the FLSA,
neither narrow nor broad, is what is called for.” Sec’y U.S. Dep’t of Labor v. Bristol Excavating,
Inc., 935 F.3d 122, 135 (3d Cir. 2019) (quoting Encino Motorcars, LLC v. Navarro, 138 S. Ct.
1134, 1142 (2018)).
The statutory exclusion under section 7(e)(5) of the Act permits an employer to exclude extra
compensation provided by a premium rate paid for certain hours worked in any day or workweek
because such hours are in excess of 8 in a work day or 40 in a workweek. See 29 U.S.C.
§ 207(e)(5). Section 7(h) further permits an employer to credit any payments excludable under
section 7(e)(5) towards overtime pay owed under the FLSA. 29 U.S.C. § 207(h)(2). These two
provisions permit an employer to pay its overtime pay obligations through an overtime premium
rate for hours worked in excess of 40 in a workweek. WHD’s regulation at 29
C.F.R. § 778.202(a) explains that:
A written or unwritten employment contract, agreement, understanding, handbook,
policy, or practice may provide for the payment of overtime compensation for hours
worked in excess of ... 40 per week. If the payment of such overtime compensation
is in fact contingent upon the employee’s having worked ... in excess of [40] in the
workweek..., the extra premium compensation paid for the excess hours is
excludable from the regular rate under section 7(e)(5) of the Act and may be credited
toward statutory overtime payments pursuant to section 7(h) of the Act.
The regulation at 29 C.F.R. § 778.309 further clarifies that, where an employee “works a regular
fixed number of hours in excess of the statutory maximum each workweek,” the employer may
pay that employee, “in addition to his compensation for nonovertime hours, a fixed sum in any
such week for his overtime work, determined by multiplying his overtime rate by the number of
overtime hours regularly worked.” Id.
2

2
The regulations further note that it is unlawful for an employer to agree with his employees that they will receive the
same total sum, comprising both straight time and overtime compensation, in all weeks without regard to the number
of overtime hours (if any) worked—“[t]he result cannot be achieved by the payment of ... a lump sum for overtime.”
29 C.F.R. § 778.500(b).

3

Employers of workers who work shifts of 24 hours or more and live-in employees, including live-
in domestic service employees, may exclude sleep time from those employees’ hours worked,
provided several conditions are met. For live-in employees, the employer and employee should
have a reasonable agreement to exclude sleep time, the employer must provide the employee
“private quarters in a homelike environment,” and the employee must get reasonable periods of
sleep totaling at least five hours. See 29 C.F.R. § 785.23; WHD Field Assistance Bulletin 2016-1
(Apr. 25, 2016). Some employees who do not qualify as “live-in” employees under the FLSA
work for shifts of 24 hours or more. As to those employees, an employer may exclude up to 8
hours of the employee’s sleep time from hours worked if certain requirements—similar to but
distinct from those for live-in employees—are met.
3
See 29 C.F.R. § 785.22. Employees who
work shifts of less than 24 hours may not have any sleep time excluded, even if he or she is
permitted to sleep during a shift. See 29 C.F.R. § 785.21.
OPINION
As a general matter, extra compensation you pay caregivers for hours worked in excess of 40 in a
workweek or in excess of 8 in a workday may be excludable from the regular rate as an overtime
premium under section 7(e)(5) of the FLSA and credited towards your overtime pay obligations
under section 7(h) of the Act in any workweek in which overtime pay is owed.
4

To qualify as an overtime premium under section 7(e)(5), extra compensation must in fact be
contingent upon working hours in excess of 40 in a workweek or 8 in a day. See 29 C.F.R.
§ 778.202(a). Such a premium does not need to be paid pursuant to a formal contract or written
agreement, so long as it is made pursuant to some form of legitimate agreement or understanding.
Id.; see also Regular Rate under the Fair Labor Standards Act, 84 Fed. Reg. 68,763 (Dec. 16,
2019). Your letter states that you and your caregivers have agreed that the caregivers’
compensation for live-in and extended shifts includes an overtime premium equal to one and one-
half times the hourly rate for all hours worked over 40 in a workweek. Your letter further
indicates that you and your caregivers have agreed to an overtime premium equal to one-and-one-
half times the hourly rate for hours worked in excess of 8 in a workday, even where the number of
hours worked in a workweek is less than 40.
The pay calculation examples in your letter indicate that, when total hours worked in a workweek
exceeds 40, you pay your caregivers, in addition to the hourly rate, an overtime premium equal to
one-half times the hourly rate for each expected or unexpected hour worked that is in excess of 8
in a workday.

In such a workweek, the overtime premiums you pay for hours worked in excess of

3
These requirements include that (1) the employee be provided “adequate sleeping facilities,” (2) she “can usually
enjoy an uninterrupted night’s sleep,” and (3) the parties have an “expressed or implied agreement” to exclude the
sleep time. 29 C.F.R. § 785.22(a).
4
Your letter also asked whether your compensation arrangement qualified as a lump sum overtime payment under 29
C.F.R. § 778.310, and as discussed further in section 32j06 of WHD’s Field Operation Handbook (FOH). Courts have
held that the type of compensation arrangement you describe in your letter is not a lump sum payment, but instead an
hourly premium paid based on expected overtime hours. See, e.g., U.S. Dep’t of Labor v. Fire & Safety Investigation
Consulting Servs., LLC, 915 F.3d 277, 283 n.5 (4th Cir. 2019) (explaining that 32j06 “solely applies for limited
periods, where employers compensate employees with a lump sum for a special job for an estimated number of
overtime hours. This provision is inapplicable for regularized work schedules that purportedly include overtime
compensation.” (quotation marks and citation omitted)).

4
8 in each day, whether expected or unexpected, may be excluded from the regular rate under
section 7(e)(5) and credited towards your overtime obligations under section 7(h).
5
If a caregiver
works the expected number of hours, the agreed-upon premium you provide at one-half times the
hourly rate for expected overtime hours would fulfill your overtime obligation under the FLSA. If
the caregiver works more than the expected number of hours, you must supplement the overtime
premium with additional compensation as appropriate. Your letter indicates that you provide such
supplemental compensation at a rate of one and one-half times the hourly rate for unexpected
hours worked over 8 hours in a day in such workweeks, and as such, this practice appears to be
consistent with the FLSA’s overtime provisions.
CONCLUSION
For the foregoing reasons, your practice of paying overtime for hours over 8 in a day based on
expected number of hours worked and providing supplemental pay for unexpected additional
hours as appropriate is consistent with the FLSA’s overtime provisions.
This letter is an official interpretation of the governing statutes and regulations by the
Administrator of the WHD for purposes of the Portal-to-Portal Act. See 29 U.S.C. § 259. This
interpretation may be relied upon in accordance with section 10 of the Portal-to-Portal Act,
notwithstanding that after any such act or omission in the course of such reliance, the
interpretation is “modified or rescinded or is determined by judicial authority to be invalid or of no
legal effect.” Id.
We trust that this letter is responsive to your inquiry.
Sincerely,
Che
ryl M. Stanton
Administrator
*Note: The actual name(s) was removed to protect privacy in accordance with
5 U.S.C. 552(b)(6).
5
You are, of course, required to track the actual number of hours worked each week and compensate employees
accordingly. See 29 C.F.R. § 516.2(a)(6) (explaining that records must include the regular hourly rate of pay as well
as the amount and nature of each payment which, pursuant to section 7(e) of the Act, is excluded from the regular
rate). Further, this letter does not address and merely assumes that other applicable requirements are satisfied,
including provision of adequate sleeping facilities.