Department of Labor Seeks Comments on ‘Fluctuating Workweek’ Overtime Calculations

The U.S. Department of Labor (DOL) released its anticipated proposal to cover more workers and provide employers with greater flexibility under the fluctuating workweek method of calculating overtime pay.

The fluctuating workweek method can be used under the federal Fair Labor Standards Act (FLSA) to calculate overtime pay for salaried nonexempt employees who work hours that vary each week. The proposed rule would allow employers to pay bonuses and other incentive-based compensation to employees under this method. This method of compensation requires weekly calculations, he said, and employers should carefully audit themselves to be sure that these calculations are prepared properly.

Under the fluctuating workweek method, employees who are entitled to overtime pay receive a fixed weekly salary, which is divided by the actual number of hours an employee worked in the week to determine the week’s base hourly rate. The employees will then receive an additional 0.5 times their base rate for each hour worked beyond 40 in the workweek.

This is an alternative to the FLSA’s regular method of calculating overtime pay, under which employees are paid an hourly rate and receive 1.5 times that rate for overtime hours. To use the fluctuating workweek method, employees’ hours actually have to change on a week-to-week basis and employees must receive the fixed salary even when they work less than their regularly scheduled hours. Additionally, there must be a clear mutual understanding between the business and employees about how workers are paid. The proposed rule will be published in the Federal Register Nov. 5, and interested members of the public will have 30 days to submit comments. Employers that wish to comment on the proposal may do so by visiting www.regulations.gov and searching for rulemaking docket RIN 1235-AA31.