Bengals QB Should Know The Hazard Pay Overtime Rule-And So Should You

Posted by Kenneth N. Winkler on

As a life-long Cincinnati Bengals fan, I was excited when the Bengals selected quarterback (QB) Joe Burrow as the number one pick in last year’s NFL draft. At the same time, I felt bad for Burrow.

The Bengals have not been very competitive for a long time.  They have had five consecutive losing seasons and have not won a playoff game for 30 straight years, the longest streak in the NFL.  The Bengals have also suffered a number of devastating injuries to its top draft picks and key players through the years including Carson Palmer, Ki-Jana Carter, Tim Krumrie and Greg Cook.  As a tormented Bengals fan, I feared it would only be a matter of time before Burrow got injured and any hope for a winning season would be extinguished. 

Sadly, my fears came true. Burrow suffered a gruesome knee injury in a November 22 game – tearing both his ACL and MCL. Burrow’s knee injury confirmed that playing for the Bengals is dangerous, especially if you play quarterback. In fact, most Bengals fans will agree that any QB drafted by the Bengals should receive extra compensation in the form of hazard pay.  

While I contemplated Burrow’s injury and the concept of hazard pay, I came across an article that discussed the pressure being placed on retailers to reinstitute hazard pay for their employees with the onset of busy holiday shopping and the rise in COVID-19 positive cases.  It struck me that everything today has some connection to COVID-19, and hazard pay is no exception.  

Until recently, only employers in certain industries (such as the military, mining and construction) paid hazard pay.  This changed with the pandemic. Many essential workers in a myriad of industries suddenly became at risk of exposure to COVID-19. They received hazard pay in recognition of this risk and as an incentive to show up to work.

The DOL Guidance on Hazard Pay Overtime Rule
Employers paying hazard pay or contemplating paying hazard pay must understand how to properly treat hazard pay for wage and hour compliance.  Hazard pay means employees receive additional pay for performing hazardous duty or work involving physical hardship. Work duty that causes extreme physical discomfort and distress which is not adequately alleviated by protective devices is deemed to impose a physical hardship.

The Fair Labor Standards Act (“FLSA”) does not require the payment of hazard pay, but the FLSA does require that hazard pay be included as part of an employee’s regular rate of pay in computing overtime pay.   The Department of Labor’s (DOL) COVID-19 and the Fair Labor Standards Act Questions and Answers clarified that employer-paid incentive payments, such as hazard pay for work performed during the COVID-19 emergency, must be included in the regular rate used to compute employees’ overtime pay.  To the contrary, incentive payments provided to employees by a state or local government may be excluded.

The DOL’s Questions and Answers provides the following explanations in response to questions nos. 20-23:

20. I am an employee of a private employer that began paying me incentive payments, such as hazard pay, for working during the COVID-19 emergency. Do those incentive payments have to be included in the regular rate that is used to compute my overtime pay?
Yes. Payments your employer provides you to perform work constitutes compensation for employment that must be included in the regular rate, subject to eight exclusions described in section 7(e) of the FLSA. None of those exclusions apply to the incentive payments described above.

21. I am an employee of a state or local government that began paying me incentive payments, such as hazard pay, for working during the COVID-19 emergency. Does my government employer have to include such incentive payments in the regular rate that is used to compute my overtime pay?
Yes. The incentive payments are authorized, managed, and paid for by your government employer as compensation for working during the COVID-19 emergency. As such, the payments are compensation from your government employer that must be included in the regular rate.

22. I am a private employer. My state or local government has a program that allows my employees to apply for and receive incentive payments, such as hazard pay, for working during the COVID-19 emergency. I am not involved in developing the program or in disbursing the government-provided incentive payments. Do I need to include such incentive payments in the regular rate that is used to compute employees’ overtime pay?
No. Under the FLSA, only compensation for employment must be included in the regular rate used to compute overtime pay. Hazard pay and other incentive payments for working during the COVID-19 emergency that the government provides directly to your employees, i.e., without your involvement, are not compensation for employment that must be included in the regular rate.

23. I am a private employer. My state or local government indirectly provides incentive payments, such as hazard pay, to my employees for working during the COVID-19 emergency by using me as an intermediary. The government provides me with the payments, which I disburse to my employees. Do I need to include such pay in the regular rate that is used to compute overtime pay for my employees?
No, unless there is an agreement between you and your employees to treat the government-provided incentive payments for working during the COVID-19 emergency as compensation for employment.

Under the FLSA, only compensation for employment is required to be included in the regular rate used to compute overtime pay. By acting as an intermediary that facilitates these payments, without more, you do not turn government-provided incentive payments for working during the COVID-19 emergency, such as hazard pay, into compensation for employment. However, if you and your employees expressly or implicitly agree to treat the government-provided payments as compensation for employment, then such payments must generally be included in the regular rate.

Employers and the Hazard Pay Overtime Rule
The COVID-19 pandemic has changed what jobs are considered dangerous and essential. Today, jobs in diverse industries expose employees to the risks of COVID-19.  As hazard pay becomes applicable to more employees, employers must ensure that they properly include hazard pay when calculating overtime.