When an employee is paid at two different rates, the employer may indeed average them to determine the effective rate for overtime. It should be a weighted average: rate 1 x hours at rate 1 + rate 2 x hours at rate 2 divided by total number of hours. For a simple example, say that an employee's two rates are $20 and $10 per hour, and he worked 50 hours total--30 at $20, 20 at $10. He earned a total of 30 x $20 + 20 x $10 = $600 + $200 = $800 for working 50 hours; his effective hourly rate is therefore $800/50 = $16/hour, and his overtime would be based on that.