The DOL on Monday issued a proposal that would give employers more flexibility in calculating overtime pay for non-exempt salaried workers with fluctuating schedules.
The fluctuating workweek method is a way of calculating overtime pay for non-exempt employees who are paid a fixed salary, but whose hours fluctuate from week to week. The fluctuating workweek method can be extremely advantageous for employers, experts say, because it allows an employer to pay a non-exempt employee a fixed salary covering all of the employee’s straight-time work, regardless of the number of hours worked.
Also see: DOL (finally) finalizes overtime rule
The regulation would clarify the Fair Labor Standards Act’s fluctuating workweek compensation method.
The new rule would allow employers to include bonuses and other incentives in the regular rate calculation, rescinding language from an Obama-era rule. Verbiage in a preamble to a 2011 regulation suggested paying bonuses is inconsistent with fluctuating work, says Paul DeCamp, an attorney with the law firm Epstein Becker Green.
The DOL’s new proposal aims to clear up confusion caused by the DOL’s foray into rulemaking in 2011, which was more a half measure and left courts scratching their heads, he explains.
“We saw court cases arising where the same employer offering the same bonus plan in different courts were reaching different outcomes,” DeCamp says. “One court saying payment of bonus defeats the fluctuating workweek and another court saying it does not.”
The department’s proposal could make calculating these wages more consistent and easier to apply across the board.
For example, some jurisdictions, like California, say fluctuating workweeks are unlawful, he says.
There, DeCamp illustrates, for an employee making $1,000, that salary would be allocated only to the first 40 hours. Each hour after those 40 would be time and a half at $37.50.
Alternatively, elsewhere under federal law, that $1,000 salary would be spread out over 50 hours in a workweek, so the overtime pay there would be $100 instead of $375 dollars in California for an additional 10 hours of overtime.
“For far too long, job creators have faced uncertainty regarding their ability to provide bonus pay for workers with fluctuating workweeks,” Wage and Hour Division Administrator Cheryl Stanton said in a statement. “This proposed rule will provide much-needed clarity for job creators who are looking for new ways to better compensate their workers.”
This proposal is available for public comment for 30 days, and the agency encourages interested parties to submit comments on the proposed rule.