According to Boy Genius Report, archeologists in Iraq recently discovered a 5,000-year-old Mesopotamian tablet, which the site artfully describes as a “pay stub for beer due.” If the interpretation of the tablet is to be believed, ancient Mesopotamians were paid in beer for their labor.
“That was 3000 B.C., and this is 2016 A.D.,” you’re saying to yourself. “What possible relevance does this story have to modern employers?” The answer may surprise you.
Believe it or not, it is not illegal under the Fair Labor Standards Act to pay employees in kind, that is, with food or lodging. Thus, this story helps illustrate this lesser known provision of the FLSA.
Section 3(m) of the FLSA provides:
“Wage” paid to any employee includes the reasonable cost, as determined by the Administrator, to the employer of furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees.The leading case on the issue of meal credits as FLSA wages is Herman v. Collis Foods, Inc. (6th Cir. 1999), which establishes that an employer who wishes to claim the section 3(m) meal credit must establish each of the following four factors:
- The meal is regularly provided by the employer or by similar employers;
- The meal is furnished in compliance with applicable federal, state, or local law;
- The meal is provided primarily for the benefit of the employee rather than the employer; and
- The employer maintains accurate records of the costs incurred in furnishing the meal.
Herman specifically rejected the DOL’s argument that the employee must voluntarily accept the meal for it to count as payment in lieu of wages. While the DOL still formally maintains this position, in a Field Assistance Bulletin it makes it clear that because courts have rejected the DOL’s position, it no longer enforces the voluntary requirement. Thus, employees need not voluntarily accept meals instead of cash wages for an employer to count the reasonable cost or fair value of the meal toward its minimum wage obligation.
To calculate an hourly rate including the section 3(m) credit, the value of the meal is added to cash wages (excluding overtime compensation) and divided by the hours worked in a given week. The credit goes toward the employer’s minimum wage obligation and is included in the determination of the employee’s regular rate of pay for purposes of calculating any overtime compensation due for that work week.
So, there you have it. Under the right circumstances, an employer can pay an employee (at least in part) with a meal. And who am I to judge whether beer qualifies as a meal?