The Wage and Hour Division of the United States Department of Labor (DOL) recently issued a letter that examines the method of calculating overtime pay under the Fair Labor Standards Act (FLSA) when using the fluctuating workweek method. (Opinion Letter FLSA2020-14)
In general, the FLSA requires employers pay nonexempt employees at least “one and one-half times the regular rate at which [the employee] is employed” for all hours worked over 40 in a workweek 29 U.S.C. § 207(a). In other words, for each additional hour over 40 that a nonexempt employee works, the employee is entitled pay at a rate of 1.5 times their regular hourly rate of pay.
However, this is not always the case. Under the FLSA, the fluctuating workweek method for paying overtime allows employers to pay employees for overtime hours at a rate of only 0.5 times their regular hourly rate of pay, provided that certain conditions apply:
- The employee’s hours of work fluctuate week to week;
- The employee received a fixed salary that does not vary with the number of hours worked;
- The amount of the fixed salary is sufficient to satisfy the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours the employee works is greatest;
- The employee and the employer have a clear and mutual understanding that the fixed salary is compensation (apart from overtime premiums and any bonuses, premium payments, commissions, or other additional pay that may not be excluded from the regular rate) for the total hours worked each workweek regardless of the number of hours; and
- The employee receives, in addition to the fixed salary and any bonuses, premium payments, commissions, and additional pay of any kind, compensation for all overtime hours worked at a rate of not less than one-half the employee’s regular rate of pay for that workweek.
WHAT THESE QUALIFICATIONS MEAN FOR NONEXEMPT WORKERS
The DOL was recently asked whether an employee’s hours of work must fluctuate over 40 hours from workweek to workweek in order for the fluctuating workweek method to apply. The plain language simply states that an employee’s hours fluctuate from week to week; not that they fluctuate above and below 40 hours in a workweek.
Though not directly related to the prior request, the Wage and Hour division noted that the fluctuating workweek method is not a reason for an employer to deduct from an employer’s salary regarding occasional absences from the employee. Section 778.114’s requirement that an employee be paid a “fixed salary that does not vary with the number of hours worked in the workweek” prohibits such deductions.
However, an employer may use the fluctuating workweek method to take occasional disciplinary deductions from an employee’s salary for unexcused absences or tardiness or for “infractions of major work rules, provided that the deductions do not cut into the [required] minimum wage or overtime pay….” 29 C.F.R. § 778.114(d)