The federal Fair Labor Standards Act (FLSA) regulations permit an employer to compensate a non-exempt employee on a salary basis by providing straight-time compensation for all hours worked in a week and additionally paying only 0.5 times (rather than 1.5 times) the regular rate for all hours worked in excess of 40 for that week. 29 C.F.R. § 778.114. This is known as the fluctuating workweek (FWW) method.
An important principle affecting the FWW method is that any payment to an employee beyond his base salary (other than overtime pay) can threaten the applicability of the FWW method. The Department of Labor regulation requires that the employee receive a “fixed salary.” 29 C.F.R. § 778.114. Courts have held that premium or bonus payments, such as shift differentials, may result in other than a fixed salary and negate applicability of the FWW method. The DOL recently considered amending the FWW regulation to permit the payment of bonuses, but eventually rejected that amendment because it concluded such additional payments were inconsistent with the FWW method.