Fourth Circuit: FLSA Lodging Credit Still Applies to Hours-Worked Agreements

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January 25, 2018

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The FLSA requires employees to be paid for all hours worked, and permits employers and employees to agree on the number of hours worked when the employee lives on the employer’s premises, provided that the FLSA’s wage and hour requirements are followed (e.g., minimum wage, overtime paid, etc.). In Balbed v. Eden Park Guest House, LLC, the Fourth Circuit Court of Appeal stated that even when an employer and employee enter into a reasonable agreement of hours worked, the FLSA’s requirements for calculating the lodging credit are still enforceable.

There, employee Balbed received a monthly salary in addition to lodging and utilities, but claimed that the employer did not properly compensate her for all hours worked and overtime wages.  The employer used the fair market commercial value of the lodging, combined with the employee’s monthly salary, to calculate compliance with minimum wage requirements. The court stated that the FLSA regulations require lodging to be calculated using the lesser of reasonable cost (not including the employer’s profit) or fair value (equal to or less than the amount the employer actually pays for the housing).

In sum, employers taking a lodging credit must comply with U.S. DOL regulations on calculating the correct compensation value of the housing, rental, and utility payments, and employers must keep records on the cost to provide housing and the employee’s wage calculations where such expenses are taken into account.

Action Items

  1. Review the recent ruling here.
  2. Have live-in employee contracts reviewed with legal counsel, if applicable.
  3. Have wage calculations audited for compliance with the FLSA, including calculation of lodging value.
  4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2018 ManagEase

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