On November 5, 2019, the Department of Labor (“DOL”) published a proposal to revise regulations governing the fluctuating workweek method of calculating overtime pay under the Fair Labor Standards Act (“FLSA”). This method of calculating overtime may apply if certain conditions are met. These conditions include that the employees paid under this method work fluctuating hours, and they and their employers agree that the employees are paid fixed salary for all hours worked plus an overtime premium. There are very specific requirements for utilizing this method, but utilizing the method in a compliant manner can be complicated due to the need to calculate the regular rate of pay for every week in which the employee works more than 40 hours. Additionally, some state laws prohibit use of this method.
The Department’s recent proposal, which can be found here, seeks to clarify existing regulations regarding this method of calculating overtime by expressly stating that that bonuses, premium payments, or other additional payments of any kind are compatible with the method. In the past, there has been some confusion about whether these additional kinds of payments are acceptable. Under the new rule, these payments would be permissible, and would typically be included in the regular rate of pay. The proposed new rule also provides examples that seek to clarify how overtime is calculated using this method.The November 5 proposal is part of DOL’s continuing effort to revise wage and hour regulations in an employer-friendly manner. For example, in October, the Department published a proposal to implement changes to “tip-pooling” arrangements for tipped employees.[1] In September, as we advised here, DOL released the final overtime rule updating the minimum salary threshold for exempt employees under the FLSA. We discussed other recent employer-friendly developments from the Department here.
DOL is seeking comments on its proposed new fluctuating workweek rule. The comment period is open for a short, thirty-day period, or until December 5, 2019. Recent experience shows that any final proposal might differ from the proposal, so employers who use the fluctuating workweek method should pay attention to the proposal, but make changes based only on a final proposal.
Key Takeaway
Employers who utilize the fluctuating workweek method of calculating overtime should pay close attention to the progress of the rule. If the rule becomes final, employers using this method may wish modify existing agreements with employees by providing bonuses or other non-discretionary incentive compensation.
This article was drafted by Helen Holden, an attorney in Spencer Fane’s Phoenix, Arizona office. For more information, please visit www.spencerfane.com.
