In computing how much overtime an employee is due under the law, all remuneration, in any form, must be included in computing the regular rate of pay. That is, if an employee earns some extra wages in addition to his standard hourly rate, then that additional amount needs to be included in computing overtime. A common example is a production bonuse. When a production bonus is paid to an employee, it increases the employee's regular-rate-of-pay, and additional overtime payments also need to be made.
For cash payments, the computation is straight forward. However, issues come up when the employer provides the employee with benefits other than cash. For instance, if an employer provides employees "free lunches," then the value of these lunches needs to be included in the regular-rate-of-pay -- and thus, the employee will be entitled to additional overtime compensation if overtime hours are worked.
A particularly troubling issue is that some companies use "tuition benefits" programs to compensate their employees. Under a typical such program, an employee who remains in good standing -- that is, not disciplined and receiving good performance reviews, is eligible to apply for tuition benefits. While this may seem like a great "benefit" for the employee, it also must be seen as a type of compensation which needs to be included in the regular rate of pay.
First of all, few of these programs are pure benefits to the employee. Most are a reward for good behavior and also a retention system. That is, if you quit your job half way through the semester, you will be on your own paying for the rest of the semester. In addition, some companies have policies that require the employee to pay the money back if the employee quits before a certain number of years have elapsed.
No matter how clear an argument I make that these tuition benefit programs are tools used by the employer to keep compensation costs down and they are not some munificent benefit to employees, I always get the same counter argument from employers. Namely, that if they are forced to pay overtime premiums on tuition benefits to hourly employees, then they will simply stop offering the program to their hourly employees. They claim that it is these same hourly employees that can benefit most from the programs because these employees typically lack formal degrees.
The problem with that argument is that it misses the mark for why we have overtime laws. We have overtime laws because Congress decided that employees' health and well being would be better served if they only worked 40 hours a week, and employment would be more evenly distributed because it would be more economical to hire additional workers rather than working your existing employees to exhaustion.
As such, it makes no sense for an employer to say that it is a "benefit" to allow an employee to work long hours and then spend any free time that they may have taking classes. The law makes it perfectly legal for an employer to pay tuition benefits. It also makes it slightly more expensive for employers to work their employees overtime. If a company that provides tuition benefits would rather eliminate the benefit program rather than eliminate the overtime work, then it shows that the company really has no interest in the employees' well being. Of course, this would require the employer to pay enough so that the employee could live on 40 hours a week of wages, but that is a different subject.
