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February 8, 2021
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In Clark v. AMN Services, the Ninth Circuit Court of Appeal stated that certain per diem benefits were not true business expenses and should be included in the calculation of employees’ regular rate of pay for overtime purposes. There, per diem employees who traveled for work purposes were paid both an hourly wage and a weekly per diem benefit, allegedly to cover the cost of meals, incidentals, and housing while working away from home; however, the benefit payments varied related to the work performed.
The court said that determining whether a per diem must be included in the regular rate of pay is a case-specific inquiry that turns on whether the payments function to reimburse employees for expenses or instead operate to compensate employees for hours worked. To this end, it looked at several factors, including whether payments increase, decrease, or both based on time worked, whether the payments are made regardless of whether any costs are actually incurred, whether the employer requires any attestation that costs were incurred by the employee, and whether the payments are tethered specifically to days or periods spent away from home or instead are paid without regard to whether the employer is away from home.
Ultimately, the tie of the per diem deductions to shifts not worked regardless of the reason for not working; the “banking hours” system; the default payment of per diem on a weekly basis, including for days not worked away from home, without regard to whether any expenses were actually incurred on a given day; and the payment of per diem in the same amount, but as acknowledged wages, to local employees who did not travel indicated to the court that the payments functioned as compensation for hours worked rather than as reimbursement for expenses incurred.
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