On February 12, 2016, the First Circuit Court of Appeals affirmed a lower court’s decision that an employer may use the fluctuating workweek (FWW) method to calculate overtime pay rates even when an employee’s weekly pay varies because of performance-based commissions. In Lalli v. General Nutrition Centers, Inc., No. 15-1199 (February 12, 2016), the First Circuit ruled that the payment of performance-based commissions did not preclude the use of the fluctuating workweek method and did not violate the FWW’s requirement of payment of a fixed weekly salary.
Practical Impact for Oilfield Employers
This case is especially important to oilfield employers who pay job or day bonuses or commissions to field hands. It also important to oilfield employers who are fighting misclassification cases alleging overtime violations because field employees were paid a salary.
Oilfield employers often pay field employees a day or job bonus or a commission based on a daily charge to the customer. In defending against a charge that overtime compensation was not properly paid because the company paid a salary, some courts have long said that an employer may calculate unpaid overtime using a .50 coefficient, not a 1.5 multiplier, based on a case that inspired the FWW method. Employees often challenge the use of the .50 multiplier claiming the additional pay represented by bonuses or commissions bars figuring the unpaid overtime with a .50 coefficient. Lalli adds additional, and influential, support to the use of the .50 coefficient in oilfield FLSA litigation.
For a detailed analysis of Lalli decision, see “First Circuit Approves Use of FWW Method for Pay That Varies Due to Performance-Based Commissions” on our Wage and Hour blog.