A common misconception is that the phrases “non-exempt employee” and “hourly employee” are interchangeable. However, non-exempt employees are not necessarily hourly employees; the Fair Labor Standards Act (FLSA) allows colleges and universities to pay their non-exempt employees on a salary basis as long as they meet minimum wage and overtime mandates. Paying certain non-exempt employees on a salary basis may prove a useful tool as institutions weigh the changes on campus necessitated by new FLSA regulations (previously discussed here).
DOL guidance related to higher education outlines several ways in which an institution can pay non-exempt employees a salary and any necessary overtime. But, as the title of this post suggests, the focus here will be on the fluctuating workweek method (“FWW Method”).
The FWW Method is unique in that it allows an institution to only pay a half-time (50 percent) overtime rate for hours worked over 40 in a workweek (rather than the regular one-and-one-half overtime rate), if certain conditions are met. These conditions are outlined at 29 C.F.R. § 778.114 and are summarized as follows:
- The employee’s hours fluctuate from workweek to workweek;
- The employee receives a fixed salary that does not vary with the number of hours worked during the workweek (excluding overtime premiums);
- The fixed amount is sufficient to provide compensation every workweek at a regular rate that is at least equal to the minimum wage;
- The employer and employee share a “clear mutual understanding” (i.e., advance notice to the employee) that the employer will pay that fixed salary regardless of the number of hours worked; and
- The employee receives a 50 percent overtime premium in addition to the fixed weekly salary for all hours worked in excess of 40 during the workweek.
Here is a chart illustrating how the FWW Method works in practice:
Click here to view table.
What this Means for You
The recent FLSA amendments present administrative and financial challenges for colleges and universities across the country. Understanding the tools—such as the FWW Method—in the toolbox can help your institution navigate these changes and create a framework for compliance going forward.