One method of computing overtime payments under the FLSA is the “fluctuating workweek” method. The Department of Labor’s interpretive bulletin, 29 C.F.R. § 778.114, sets forth this example of determining the regular rate of pay when an employee is paid a salary for all hours worked in a workweek, whether few or many. Because the salary is intended to compensate the employee at straight time rates for whatever hours are worked in the workweek, the regular rate of pay is determined by dividing the number of hours worked in the workweek into the amount of the salary to obtain the applicable hourly rate for the week. Payment for overtime hours at one-half such rate in addition to the salary satisfies the overtime pay requirement because such hours have already been compensated at the straight time regular rate, under the salary arrangement. For example, a fluctuating workweek employee with a $1000/week salary who works 50 hours is entitled to $1000/50 = $20 * (0.5) = $10/hour for each of his ten overtime hours, or $100 in overtime premium pay. The regulation does not address any degree to which hours must fluctuate. A new ruling from federal court in Missouri reemphasizes that fluctuation above the 40 hours statutory threshold alone is sufficient. Speer v. Cerner Corp., 2015 U.S. Dist. LEXIS 75946 (W.D. Mo. May 22, 2015).
In Speer, plaintiffs alleged that by applying the fluctuating workweek overtime concept to them, when their hours fluctuated only above 40 (and never dipped below), defendant violated the FLSA. Citing decades-old precedent from the Seventh Circuit which had “presumably been significantly relied on by counsel [counseling employers on FLSA issues]”, Judge Howard F. Sachs observed that “the Seventh Circuit, in considered opinions, has squarely ruled against plaintiffs’ legal contention,” and that there is no appellate law to the contrary, ultimately ruling that “plaintiffs’ contention that the Fluctuating Work Week method of calculating overtime obligations cannot be used when the work week is never less than 40 hours is legally unsound.”
Implementation of the fluctuating workweek method, Belo contract or other non-hourly pay plan must be carefully reviewed under federal and state law.