EverythingPeople This Week!

Published on Tuesday, January 22, 2019

Fluctuating Workweek Method to Determine Regular Rate of Pay

Author: Michael Burns

Last week’s EPTW article, Keeping up on Your Fair Labor Standards Act Understanding, reviewed the recent Department of Labor Opinion Letter (FLSA 2018-28) outlining a legal method to calculate a regular rate of pay when more than one pay rate is paid to an employee. The Opinion Letter stated an employer may not arbitrarily set a regular rate from two or more pay rates that it uses to calculate overtime from. It must calculate the regular rate by averaging hours worked and the different rates of pay to arrive at an adjusted regular rate and that rate must be above the federal and state minimum wage.  The method described in the Opinion Letter is not the only method employers can use to determine a legal regular rate in order to calculate overtime pay.  Another common approach to calculating the regular rate is the fluctuating workweek method.work time

First let’s acknowledge that employers have a number of lawful ways to pay wages. Non-exempt worker wages can be set by an hourly rate, a daily rate, piece rate, commissions, job rate, or by salary. For purposes of determining the entire regular rate employers must also include other non-discretionary pay such as bonuses, perfect attendance pay, or pay for quality or quantity of work onto the regular rate to properly include all pay required by the Fair Labor Standards Act (FLSA). A combination of these methods of pay can also be used.

Regardless of the method and types of pay involved, they must be boiled down to an hourly rate of pay for workweeks where any overtime must be calculated. The FLSA 2018-28 Opinion Letter looks at fluctuating pay. What happens when there are fluctuating workweeks (weekly hours of work that vary)?

 The DOL and Wage and Hour Division has relied on a 2942 U.S. Supreme Court decision for when the following stipulations apply:

  • A non-exempt employee is paid a fixed salary (not hourly) for each workweek without regard for the number of hours actually worked and
  • The nonexempt employee’s hours of work fluctuate or vary workweek to workweek and 
  • Both the employer and employee understand that the salary represents straight time compensation for all hours worked in a workweek by the nonexempt employee, regardless of the number of hours worked and
  • The salary is sufficient to meet the minimum wage (state and federal) for each hour worked in any workweek and
  • The nonexempt employee is paid an overtime premium for all hours worked in excess of forty (40) hours.

To determine the legal regular rate in this circumstance the employer must:

  • Take the fixed salary (as well as any other non-discretionary pay earned) and
  • Divide it by the total hours worked in a workweek
  • Then multiply one half of that regular rate by the total number of hours worked in excess of 40 in that particular week.

The nonexempt employee’s regular rate will vary from week to week under the fluctuating workweek method.

The fluctuating workweek method is stated in 29 C.F.R Sec. 778.114.

When an employer uses two or more pay rates and the hours of work vary, they must do a calculation using both variables to determine a regular rate for that week. This rate must then be used to calculate the legal overtime rate when pay is due for hours worked in excess of 40 hours in a week.


Additional ASE Resources
CCH HRAnswers Now - ASE’s online virtual library contains easy explanations of Wage and Hour laws and regulations. Members can access the CCH library via their member dashboard.

ASE HR Hotline – ASE members can call or e-mail our research department to get prompt information on wide array of HR topics during the week from 8:30 a.m. – 5:00 p.m. The ASE Hotline helps members get clarification or further enforcement policy about the laws and regulations impacting them.

ASE Courses - ASE offers classes that teach HR professionals Wage and Hour law and regulation including determination of exempt and nonexempt status and general wage and hour law. Upcoming applicable courses include:

Wage and Hour Law: This ASE course will provide guidance on the wage and hour laws and recordkeeping obligations of the employer. Participants will learn about various exemptions, payment guidelines and restrictions, and how to calculate overtime payments.  The next class is February 20, 2019.  Register here.

FSLA Changes and Working with Exempt/Non-Exempt Classification Analysis:  This ASE course provides participants an opportunity to learn and practice using the existing and new exemption regulations to perform wage and hour classification analysis and determine exempt or non-exempt status of a position.  The next class is May 1, 2019.  Register here.


Source: Ogletree Deakins DOL's Opinion Letter Tackles Varying Average Wage Rates and FLSA Overtime Compliance Last Updated: January 9 2019 Article by Alfred B. Robinson, Jr.



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