The fluctuating workweek pay method allows employers with non-exempt employees who work varying schedules to reduce their overtime burden by guaranteeing the employees a weekly salary.  The employees are then paid a half-time overtime premium for hours in any workweek that exceed forty.  The overtime premium “fluctuates” because the regular rate from which it is derived depends upon the total number of hours worked that week.  This method can reduce overtime for eligible employees by one-third or more.

On August 22, the federal Department of Labor announced a series of technical amendments to its regulations promulgated under the Fair Labor Standards Act and the Portal-to-Portal Act.  Most of these changes deal with outdated portions of the rules, such as adjustments required by the newly increased minimum wage.  However, one of the changes contains important options for employers using the fluctuating workweek method.

Under the existing rule, employers are discouraged from providing employees on fluctuating workweek bonuses or premium payments in addition to the guaranteed weekly salary.  In some situations, the existing rules actually disqualify the employees from use of fluctuating workweek based upon these additional payments.  The proposed rule would remove this language, making clear that employers can pay shift differentials, hazard pay, or other bonuses while complying with the method’s requirements, as long as such amounts are included in the regular rate and overtime calculations.

Comments on the proposed rules are due by September 26.  The final rules should go into effect shortly thereafter.