If you work away from home, your paycheck may be split into two pieces: a modest hourly rate and a large per diem. Employers describe the per diem as reimbursement for travel expenses. Sometimes that is exactly what it is. Often it is a way to shrink the overtime they owe you.
Does per diem pay count toward my overtime rate?
Sometimes it does. A genuine per diem that reimburses your actual costs of working away from home is excluded from your regular rate under federal law, and it does not raise your overtime. But a per diem that functions as wages has to be included in the regular rate your overtime is built on. The Fifth Circuit held this in Gagnon v. United Technisource, Inc., 607 F.3d 1036 (5th Cir. 2010), where a craftsman was paid a low hourly wage plus a per-hour per diem. Because the per diem was paid by the hour and rose and fell with his hours, the court treated it as part of his regular rate and his overtime had to be recalculated.
My employer pays a low hourly rate plus a big per diem. Is that legal?
It is legal only if the per diem is a real reimbursement of real expenses. Your overtime premium is calculated on your regular rate, so an employer that quietly lowers your hourly rate and raises a per diem is lowering the number your overtime depends on. If the per diem is actually pay for working, calling it a per diem does not remove it from the regular rate. That is the exact scheme the court saw through in Gagnon. It is common in the oilfield, in construction, and in the traveling trades, and it leaves a lot of workers underpaid on overtime without knowing it.
What is the difference between a real per diem and disguised wages?
A real per diem tracks what you actually spend on the road: lodging, meals, mileage. The signs a per diem is really wages are practical ones. It is paid by the hour or by the day you work. It rises with your hours and falls when you work less. It is paid even when you have no expense, such as when you live near the site. It is a round figure unrelated to your costs. When a per diem behaves like pay for hours worked, the law treats it as part of your regular rate.
How much more overtime am I owed if my per diem should have been included?
It depends on your numbers, and it repeats every overtime week. Consider a worker paid $8 an hour plus a $12 per hour per diem who works 60 hours in a week. If the per diem belongs in the rate, the regular rate is $20, and the half-time premium is $10 on each of the 20 overtime hours, or $200 for the week. An employer that ran overtime on the $8 base alone paid only $80. The difference is $120 for one week, and it compounds across every week you worked over 40. Federal law adds liquidated damages equal to the back pay in most cases, going back two years, or three for a willful violation.
What to do next
Keep your pay stubs. The split between your hourly rate and your per diem is the whole case, and the stubs show it. Write down your typical weekly hours. Then call me at (512) 799-2048 or contact me online for a free consultation. I handle these cases on a contingency fee, and if there is no recovery you pay nothing, not even the costs.