Fix Piece-Rate Overtime Math Before Back-Wage Exposure Grows

The regular rate is the number that breaks piece-rate overtime

If your field team is paid by the piece, the next payroll can expose a back-wage gap. The Labor Department obtained a consent judgment for $800,000 in back wages and damages for 339 employees of a home-appliance company.

Wage and Hour Division investigators found that Coway USA Inc. used piece rates and failed to pay for required meetings, supply pickup and loading, and work before or after shifts, in breach of the FLSA. Those investigators also found that Coway omitted nondiscretionary incentives, bonuses, and commissions from overtime calculations and often reduced the hours shown on timecards.

The FLSA, the federal wage law, allows hourly, salary, commission, piece-rate, or mixed pay, as long as the regular rate meets the minimum wage and overtime is paid at least 1.5 times that rate. The regulation, 29 C.F.R. § 778.109, calculates the regular rate by dividing straight-time earnings actually paid by the hours actually worked in the workweek. The statute, 29 U.S.C. § 207(e), treats nearly all pay for employment as part of the regular rate, with only narrow exclusions.

In Opinion Letter FLSA2026-2, the Wage and Hour Division clarified that incentive pay from a set plan must be folded into the regular rate for FLSA overtime. A January 2026 DOL opinion letter added that the regular rate must include nondiscretionary bonus pay, shift differentials, and commissions. A bonus can be left out only as a true discretionary bonus: the employer decides whether to pay it and how much, near the end of the work period, with no prior contract, agreement, or promise.

Showing the calculation on the pay statement is good practice, because it lets the employee trace the overtime number and spot a missing commission or bonus.

Timekeeping sets the denominator

When the denominator misses compensable hours, the regular rate is too high and the overtime premium is too low. FLSA-covered employers must keep the records required by 29 CFR part 516, and the FLSA lets the Labor Department look into violations and oversee payment of missing wages or overtime.

Time records should capture all hours worked, not just the hours that produce units. A Sept. 9 federal consent judgment in the Central District of California requires Coway to capture all hours worked by the affected employees, including supply pickup, required training, and customer contact before or after appointments. Do not let a clean timecard become a false timecard. If employees are told to clock in only when they start customer work, the record may look tidy while the overtime math is already wrong.

Coway USA Inc. also agreed to a $10,000 penalty for willful violations. That judgment required pay statements that list each employee's hours, the customer services performed, and the rate paid for each hour and service.

A three-step audit keeps the math defensible

• Total the nondiscretionary pay. Add every payment that is not truly discretionary.
• Divide by all compensable hours. Use the hours your time records show for the workweek.
• Apply the overtime multiplier and verify the records. Multiply the regular rate by 1.5 for overtime hours, then check that the time records and pay statements match the calculation.

The finished pay statement should show the straight-time earnings, the hours used, the regular rate, the overtime premium, and the itemized services or units that produced the pay. A statement that cannot show that sequence is not defensible.

Review the pay statement before the employee asks for it. When the regular rate is missing a commission or a bonus, fix the calculation and correct the time record in the same pay period. A short note to payroll is better than a later demand letter.