Department of Labor Issues Opinion Letter on Calculating Overtime

On September 30, 2025, the U.S. Department of Labor (DOL) issued an opinion letter containing important reminders about how to calculate overtime pay for non-exempt employees who earn amounts in addition to their base hourly wage.

The opinion letter involved firefighters and paramedics who receive premium pay equal to one-half times their normal hourly rate for work performed during a disaster or emergency declaration. The Fair Labor Standards Act (FLSA) provides that non-exempt employees must be paid not less than one and one-half times their regular rate for hours worked above 40 in a workweek. 

An employee’s regular rate is not limited to their base hourly wage. Instead, it includes all remuneration paid to the employee, subject to only eight statutory exclusions. The question presented was whether the “emergency pay” premiums qualified for any of those exclusions. The DOL answered in the negative. Among other considerations, the DOL opined that the premiums did not qualify for the exclusions applicable to:  

1. Discretionary bonuses, because they were paid pursuant to a policy that leaves no discretion as to whether they are owed and, if so, in what amount; or
2. Premiums paid for hours worked in excess of eight in a day or 40 in a week, for work on Saturdays, Sundays, or holidays, or for work outside the employee’s normal workday, because they were earned based on the existence of an emergency and not exclusively on the criteria that trigger an exclusion merely based on when the work is performed.

Notably, DOL regulations have long provided that the regular rate includes premiums such as nightshift differentials and premiums paid for hazardous, arduous, or dirty work.¹ As with the emergency pay described in the opinion letter, such premiums do not fit neatly within any of the eight statutory exclusions.

This opinion letter is also notable for its clear explanation of the overtime calculation when an employee earns a premium that must be included in the regular rate. The DOL explains that the regular rate is determined by dividing all earnings for the workweek (excluding only those subject to the statutory exclusions) by all hours worked that week. Then, the overtime premium owed for the workweek is equal to one-half the employee’s regular rate times the number of overtime hours worked. 

The opinion letter provides an example of this calculation. In the example, the employee earned a base hourly rate of $20 per hour and worked a total of 50 hours in a workweek, 20 of which were subject to emergency pay. The DOL explained:

• Earnings Before Overtime (Including the Emergency Pay Premium) = (50 hours × $20) + (20 hours × $10) = $1,200
• Regular Rate = $1,200 ÷ 50 hours = $24
• Overtime Premium = $24 x 0.5 x (50 – 40) = $120
• Total Compensation = $1,200 + $120 = $1,320

While overtime compensation is often referred to as “one and one-half times” the employee’s regular rate, this opinion letter clarifies that the FLSA overtime premium is more properly expressed as “one-half times” the employee’s regular rate, paid in addition to the remuneration that comprises the employee’s regular rate.

The DOL’s publication of this opinion letter provides a good opportunity for employers to ensure that all remuneration that must be included in the regular rate is included in the overtime calculation. Employers with questions about whether certain remuneration should be included in the regular rate should work with experienced counsel.