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Compliance Bulletin: DOL Proposes Revisions to the Fluctuating Workweek Overtime Method

The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees–those employees who make less than the federally issued salary of $455 per week, increasing to $684 per week in January 2020, time-and-one-half the regular standard rate for any hours worked over 40 hours a week.  However, if an employer has an employee whose hours can change from week to week, there is an alternative way to calculate overtime pay to assist the employer in ease of administration and cost savings while still remaining compliant.  This method is called the fluctuating workweek method.  This method works by providing payment of an unchanging salary amount to compensate an employee for all hours worked during the week, regardless of whether the employee worked fewer or greater than 40 hours that week and Payment for any overtime hours is paid at a rate of one-half the employee’s regular rate of pay, instead of time-and-one-half.

In order for an employer to use the fluctuating workweek method, the below requirements must be met:

  1. Employee work hours fluctuate from week to week
  2. Employee is paid a fixed salary, regardless of how many hours they work week to week
  3. Employee weekly regular rate is always higher than the highest applicable minimum wage rate
  4. Employee does not qualify for an overtime exemption
  5. There is an understanding between the employer and the employee on how the employee will be paid for overtime work; and
  6. Applicable state law allows for the employer to use the fluctuating method for overtime pay

Although the above method is available for employers to use for FLSA compliance, few employers use this method due to confusion, compliance challenges, and the fact that the method is not recognized in all states.  Currently, Alaska, Pennsylvania, and California restrict or prohibit the use of fluctuating workweek overtime entirely; and, other states, like Connecticut, restrict fluctuating workweeks for particular groups of employees, e.g., retail.  To help alleviate some of the confusion, on November 5, 2019 the Department of Labor (DOL) has issued a proposed rule to update the parameters of the fluctuating workweek method.  This proposed rule would:

  • Clarify the confusion around incentive payments to those who choose to be subject to the fluctuating workweek method.
  • Confirm that incentive payments should be included as an employee’s regular rate of pay when calculating overtime using the fluctuating workweek method, unless specifically excluded based on current FLSA regulations.
  • Provide clarifications and examples in the revised fluctuating workweek method language that will help employers understand the parameters around the method, and help promote easier use.

As noted, the rule is in the proposal stage and has no impact on the current fluctuating workweek method and its regulations.  However, the DOL has asked employers to review the details of their proposal and provide feedback through mail or electronically by visiting the Federal eRulemaking Portal at by December 5, 2019.

The Compliance Bulletin provides additional details in regards to the above and examples as to how the fluctuating workweek method can be used.

Contact your Cowden representative for more information on this or other compliance issues.