Employer May Not Use Commercial Cost of Housing for FLSA Purposes

A bed and breakfast that sought to take a credit for housing against an employee’s wages under the Fair Labor Standards Act may not use the cost it charged guests as the value of the housing.

Under the FLSA, an employee’s “wages” may include “the reasonable cost… to the employer of furnishing [the] employee with board, lodging, or other facilities” in addition to cash. In Balbed v. Eden Park Guest House, the court noted that the FLSA “regulations provide only two ways to calculate the value of in-kind compensation — reasonable cost or fair value — and an employer must use whichever is less.” In addition, “the employer may only use the fair value of housing as the amount credited toward wages if the fair value is equal to or lower than the amount the employer actually pays for the housing.” In the current case, the use of the amount that the bed and breakfast charged guests improperly included the employer’s profit.