The FLSA Fluctuating Workweek: What Is It?
If you need a Columbus overtime lawyer, this article will be helpful.
What is the FLSA fluctuating workweek?
The Fair Labor Standards Act (FLSA) permits employers to pay non-exempt employees under a fluctuating workweek method, which basically means the employer pays a fixed salary for all hours worked, whether an employee works less than 40 hours or more than 40 hours a week. This allows the employer to then pay one-half the regular hourly rate for any hours worked over 40 in a week.
Am I an exempt employee or a non-exempt employee?
The FLSA requires employers to classify employees as exempt or non-exempt.
Exempt employees are excluded from minimum wage, overtime regulations, and other rights and protections afforded to nonexempt employees. Employers MUST pay a salary rather than an hourly wage for a position to be considered exempt. Common examples of exempt positions are executives, supervisory positions, professionals, and outside sales positions.
Nonexempt employees are those employees not exempt from FLSA regulations. Employees who fall within this category must be paid federal minimum wage for each hour worked (whether paid hourly or salary) and given overtime pay of not less than one-and-a-half times their hourly rate for any hours worked beyond 40 hours each week.
The only exception to this is when an employer and employee agree to a fluctuating workweek, where the employee is entitled to 50% of his/her regular hourly rate of pay for all hours worked over 40 hours.
How is an employee’s regular hourly rate calculated?
The employee’s base hourly rate is calculated by dividing the employee’s fixed weekly salary by the number of hours worked. 29 C.F.R. §778.114(a). Therefore, the hourly rate will fluctuate depending on how many hours the employee works in a week.
For example: If an employee is paid $600 a week and works 45 hours, the regular rate of pay would be $13.33. If that same employee works 40 hours the next week, the regular rate of pay would be $15.00 ($600/40). It is important to know what the regular rate of pay is before attempting to calculate what the overtime pay should be.
How is an employee’s overtime pay calculated?
Technically, the employer still pays time and a half for hours worked in excess of 40 hours but the method of calculation is different.
Using the example above, an employee is paid $600 a week for all hours worked. If the employee works 45 hours that week, the regular rate of pay would be $13.33/hr ($600/45). The individual is still entitled to overtime for those 5 hours and is paid at $6.67, ½ the regular rate of pay, for each hour worked over 40 hours. This is because the employee has already been paid his regular rate for the hours worked.
If that same employee works 50 hours the next week, their regular rate of pay would be $12.00/hr ($600/50). Therefore, the rate of overtime pay would be $6.00/hr for each hour worked over 40 hours ($12/2).
This method is attractive to employers because it has the potential to save them a lot of money while ensuring compliance with the FLSA.
What should I know as an employee?
Certain requirements must first be met for an employer to use this fluctuating workweek method of payment.
29 CFR 778.114 sets forth rules that an employer must follow in order to maintain compliance with the FLSA.
These requirements are as follows:
- The employee’s hours must actually fluctuate from week to week.
- The employee must be paid a fixed salary every week, regardless of the number of hours worked.
- For example, an employee must receive the same amount of pay in a week where he/she works 35 hours as a week where he/she works for 50 hours.
- Employees who are paid hourly DO NOT qualify here.
- The salary paid must be enough to ensure that the regular rate of pay will never drop below the minimum wage rate. If the employer is subject to state and federal minimum wage laws, the employee receives the higher rate of pay of the two.
- In addition to salary, an employee is entitled to overtime pay for any hours worked over 40 hours in a single workweek. The overtime pay is 50% of the employee’s regular rate of pay.
- Generally, there has to be a clear understanding between the employer and the employee that this method will be used. There is no requirement that this understanding is in writing but it would be good practice for an employer to document it in a policy or agreement to avoid confusion.
Recent Developments Regarding FLSA Fluctuating Workweek
In April of 2011, the U.S. Department of Labor (DOL) rejected a proposal that would have made clear that, in addition to a fixed salary, an employer could also pay employee bonuses and other non-overtime premiums without losing the benefit of the fluctuating workweek pay method.
Instead, the DOL concluded that bonuses and premium payments like these are incompatible with the fluctuating workweek method of calculating overtime and that the payment of bonuses or other premium amounts to non-exempt salaried employees may eliminate the employer’s ability to use the fluctuating workweek method.
The reasoning behind this decision by the DOL was concern that this could have permitted employers to pay a greatly reduced fixed salary and shift a larger portion of the employee’s compensation into bonuses and premium payments.
Employers must be especially careful here and should examine their payroll practices to ensure compliance.
For more information on the FLSA Fluctuating Workweek, visit the U.S. Department of Labor’s site: http://www.dol.gov/whd/flsa/
If you have questions about the FLSA fluctuating workweek or need a minimum wage or overtime attorney, please contact The Friedmann Firm today by visiting this page https://www.thefriedmannfirm.com/contact-us/.
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