Opinion Letter Issued by the Department of Labor on Calculating Overtime

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On September 30, 2025, the Department of Labor's (DOL) Wage and Hour Division issued a new opinion letter clarifying that "emergency pay" premiums provided to firefighters and other non-exempt employees during declared emergencies must be included in the regular rate of pay when calculating overtime premiums under the Fair Labor Standards Act (FLSA).

The DOL reviewed a request from a firefighter/paramedic in a Texas municipality, who inquired about the city's emergency pay policy. This policy provides a 50% premium (half the employee's base hourly rate) for every hour worked during declared emergency periods. The firefighter believed that this payment should be included in overtime calculations and sought confirmation from the DOL.

The DOL concluded that the emergency pay does not qualify for any statutory exclusion from the regular rate under Section 7(e) of the FLSA. Specifically, the payment fails the three-prong test for discretionary bonuses because, (1) once the emergency work is performed, the employer has no discretion whether to pay, (2) the amount is predetermined (50% of base rate), not discretionary, and (3) the amount is determined before the work is performed, not "at or near the end of the period."

The payment doesn't qualify as an exclusion from overtime under Sections 7(e) because the payment is not contingent on working beyond a specified number of hours (e.g., 8 hours/day or 40 hours/week), working on weekends, holidays, or special days, nor working outside regular hours or workdays. Rather, the emergency pay is a premium for hazardous or arduous work conditions, similar to night shift differential, which federal regulations specifically state must be included in the regular rate.

The DOL provided this example for proper overtime calculation:

An employee earning $20/hour works 50 hours in a week, with 20 of those hours during an emergency period:

Straight-time earnings: (50 hours × $20) + (20 hours × $10 emergency premium) = $1,200

Regular rate: $1,200 ÷ 50 hours = $24/hour

Overtime premium: $24 × 0.5 = $12/hour for 10 OT hours = $120

Total compensation: $1200 regular rate + $120 overtime premium = $1,320

Public sector employers with similar emergency pay policies should determine whether emergency, hazard, or other conditional premium pay is being properly included in regular rate calculations. Employers should also consider whether retroactive adjustments may be needed.

The opinion applies specifically to the facts presented in the letter, but provides important guidance for employers providing premium pay for working during emergencies, hazardous conditions, or other special circumstances that don't fit within the narrow FLSA exclusions.

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