Impact of Per Diem Expense Reimbursements on Overtime Pay

The Fair Labor Standards Act says overtime pay—time and a half after 40 hours—for nonexempt workers, is based on a regular rate of pay. When an employer provides a per diem reimbursement for travel, tools, or other employee expenses, the reimbursement may or may not be included in the regular rate of pay. An exclusion is allowed for reasonable payments of employee expenses incurred in the furtherance of an employer’s interest. But, as the U.S. Department of Labor pointed out recently, employees must actually incur the expenses. While an approximation of expenses is permissible, it must be reasonable. “Tool and expense reimbursement payments cannot be used to artificially reduce employees’ regular rates of pay, in an attempt to reduce the amount an employer must pay its employees for overtime work.” #IdeaoftheDay