Department of Labor’s Clarifies Weekly Hourly Requirements and Salary Deductions For Fluctuating Workweek Calculation in a New Opinion Letter
By Aaron Chaet
On August 31, 2020, the Department of Labor’s Wage and Hour Division (“WHD”) issued an opinion letter (the “Opinion Letter”)FN1 regarding the workweek fluctuation method.FN2 The Opinion Letter clarifies that employees’ hours do not need to fluctuate below 40 hours per week to qualify for the fluctuating workweek calculation method.FN3 Rather, the regulations only require that employees’ hours fluctuate from week to week.FN4 In fact, the WHD has previously stated that this method may be appropriate when employees consistently work more than 40 hours per week.FN5
The Opinion Letter also reaffirmed that employers, using the fluctuating workweek method, may not generally deduct employees’ absences from their salary. This is true even if the employee has “exhausted a sick leave bank or not yet earned sufficient sick leave to cover an absence due to illness.”FN6 The limited exceptions to the prohibition is that an employer may deduct from an employee’s salary for “willful absences or tardiness or for infractions of major work rules, provided that the deductions do not cut into the [required] minimum wage or overtime pay….”FN7
TAKEAWAY
Given the significant increase in employees working from home as well as juggling childcare due to remote education, employers with nonexempt employees may want to consider transitioning certain employees to a fluctuating workweek method of calculation. As identified in the Opinion Letter, there is no requirement that employees consistently fluctuate below or above 40 hours per week. Rather, the only requirement is that the hours actually fluctuate from week to week. Please contact the attorneys at Campbell Litigation to determine if transitioning employees to a fluctuating workweek is a viable option for your company.
Footnotes:
FN1 – WHD Opinion Letter FLSA 2020-14 (Aug. 31, 2020) accessed at https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/2020_08_31_14_FLSA.pdf
FN2- The Fair Labor Standards Act (“FLSA”) requires employers to compensate employees at a rate of at least one-half the employee’s regular rate of pay for hours actually worked in excess of 40 hours in a particular week. 29 C.F.R. § 778.114(a)(5). The fluctuating workweek method allows employers to pay a fixed salary to employees as a method to satisfy the overtime pay requirements for nonexempt employees. The requirements include that: (1) the employee works hours that fluctuate week to week; (2) the employee receives a fixed salary that does not vary with the number of hours worked each week; (3) the employee’s fixed salary meets minimum wage requirements; (4) the employee and employer have a clear understanding that the salary is fixed; and (5) employee receives overtime compensation, in addition to his or her fixed salary. See 29 C.F.R. § 778.114(a)(1)-(5).
To calculate the regular rate of pay under the fluctuating workweek method, employers must divide the salary per week by the number of hours worked. 29 C.F.R. § 778.114(b)(1). For instance, if an employer pays an employee $600 per week and that employee works 40 hours in a week, then the employee’s regular rate of pay is $15.00 per hour ($600/40). If the same employee works 50 hours in another week, then the employee’s regular rate of pay is $12.00 per hour ($600/50). In this second instance, the employee would receive $600 in a fixed salary, plus 10 hours of overtime at a rate of one-half times the regular rate of $12.00 for a total overtime payment of $60.
FN3 – WHD Opinion Letter FLSA 2020-14
FN4 – Id. citing 29 C.F.R. § 778.114(a)(1)
FN5 – Id. citing WHD Opinion Letter FLSA (Oct. 27, 1976)
FN6 – Id. citing FLSA2006-15 Opinion Letter (May 12, 2006)
FN7 – Id. citing 29 C.F.R. § 778.114(d) (emphasis is the original)