The Ninth Circuit Court of Appeals issued a published decision holding that a weekly per diem benefit should have been included in employees’ “regular rate of pay” under the Fair Labor Standard Act (“FLSA”).  Clarke v. AMN Services (Feb. 8, 2021).

Plaintiffs worked as traveling clinicians for AMN Services, LLC, a healthcare staffing company.  AMN paid them a designated hourly wage and a weekly per diem benefit.  Plaintiffs argued that their weekly per diem benefits were improperly excluded from their regular rate of pay under FLSA, which decreased their wage rate for overtime hours.

The Court held that the per diem benefits functioned as compensation for work rather than as reimbursement for expenses incurred, and the benefits were thus improperly excluded from plaintiffs’ regular rate of pay for purposes of calculating overtime pay.  The Court’s reasoning was based on:

• AMN paid local clinicians who did not travel the same amount of per diem, and treated such per diem benefit as wages.
• AMN made pro-rated deductions from per diem payments for hours not worked; AMN did not make deductions based on whether the employee incurred expenses away from home.
• AMN considered “banked” hours (clinicians could “bank” hours by working extra hours in one week and later “offset missed shifts”) in calculating a weekly per diem payment, which connected the payment to hours worked rather than expenses incurred.

If your business pays per diem benefits to employees, review whether such payments should be included in calculating employees’ regular rate of pay, including by looking at whether they are tied to expenses or hours worked.