US DOL WHD Opinion Letters on Overtime and Fluctuating Workweek

Wednesday, September 2, 2020

On August 31, 2020, the U.S. Division of Labor’s (DOL) Wage and Hour Division (WHD) launched Opinion Letter FLSA2020-14. The opinion letter explains that an worker’s hours don’t must fluctuate under 40 hours per week to ensure that the worker to qualify for the fluctuating workweek methodology of calculating extra time pay. The opinion letter additionally states that employers availing themselves of the fluctuating workweek methodology could not “deduct from an worker’s wage for absences occasioned by the worker,” topic to some exceptions.

Background on the Fluctuating Workweek Methodology

The fluctuating workweek methodology for complying with the Honest Labor Requirements Act’s (FLSA) extra time necessities is about forth in 29 C.F.R. § 778.114. It permits the cost of a hard and fast wage for fluctuating hours as a method employers can meet their extra time pay obligations to nonexempt workers, if sure circumstances are met.

The mounted wage compensates an worker at straight-time charges for no matter hours the worker labored in a workweek. Thus, making use of the fluctuating workweek methodology, an employer satisfies the FLSA’s extra time necessities if it compensates the worker, along with the mounted wage quantity, at a charge of at the very least one-half the worker’s common charge of pay for the hours the worker labored every workweek in extra of 40 hours. As a result of the worker’s work hours fluctuate from week to week, the common charge is decided weekly based mostly on the variety of hours really labored. The extra hours the worker works, the decrease the common hourly charge.

As we reported in June 2020, the WHD revealed a revised regulation clarifying the standards an employer should meet with a purpose to “use the fluctuating workweek methodology to correctly compute the common charge and extra time pay owed [to a nonexempt employee] beneath the FLSA.” The regulation supplied, amongst different issues, that bonuses and premium funds have been suitable with the fluctuating workweek methodology. The regulation took impact on August 7, 2020.

The Opinion Letter’s Evaluation

The WHD started its evaluation in FLSA2020-14 by citing the next standards for using the fluctuating workweek methodology, as articulated within the revised regulation:

The worker’s hours of labor fluctuate from week to week;
The worker receives a hard and fast wage that doesn’t range with the variety of hours labored;
The quantity of the mounted wage is adequate to fulfill the relevant minimal wage charge for each hour labored in these workweeks during which the variety of hours the worker works is best;
The worker and the employer have a transparent and mutual understanding that the mounted wage is compensation (other than extra time premiums and any bonuses, premium funds, commissions, or different extra pay that will not be excluded from the common charge) for the full hours labored every workweek whatever the variety of hours; and
The worker receives, along with the mounted wage and any bonuses, premium funds, commissions, and extra pay of any type, compensation for all extra time hours labored at a charge of not lower than one-half the worker’s common charge of pay for that workweek.

In response to the opinion letter, the regulation “makes clear that there is no such thing as a requirement that an worker’s hours range each above and under 40 per week to return throughout the rule; it requires solely that the worker’s hours fluctuate from week to week.” The WHD additionally famous that the “WHD has lengthy held that the fluctuating workweek methodology doesn’t require that an worker’s hours fluctuate under 40 hours per week.” As such, the WHD concluded that “assuming all the different circumstances for utilizing the fluctuating workweek methodology are happy, an worker could qualify for the fluctuating workweek methodology if their hours fluctuate solely above 40 hours per week.”

However the WHD emphasised that it “has lengthy held that an employer utilizing the fluctuating workweek methodology could not deduct from an worker’s wage for absences occasioned by the worker.” Such deductions are opposite to the “requirement that an worker be paid a ‘mounted wage’” for all hours labored in a workweek. Subsequently, it’s the WHD’s place, for instance, that an employer “could not deduct from an worker’s wage when the worker has exhausted a sick go away financial institution or not but earned adequate sick go away to cowl an absence resulting from sickness.”

In response to the opinion letter, an exception to this rule exists for “occasional disciplinary deductions from [an] worker’s wage for willful absences or tardiness or for infractions of main work guidelines, supplied that the deductions don’t reduce into the [required] minimal wage or extra time pay.” (Brackets and emphasis within the authentic)

Conclusion

The fluctuating workweek methodology for computing extra time pay stays an possibility for employers complying with the FLSA’s extra time requirement in relation to sure nonexempt, salaried workers. The readability supplied to employers by the revised regulation, and the WHD’s latest opinion letter, could help employers with figuring out whether or not the fluctuating workweek methodology is smart for his or her workforces.

It’s unclear whether or not the brand new regulation might be topic to problem, or whether or not courts will defer to the WHD’s interpretive steerage, together with this latest opinion letter. Employers could wish to verify that the fluctuating workweek methodology complies with relevant state or native extra time legal guidelines.