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U.S. Labor Department Updates Guidance on Fluctuating Workweek Pay Method

    Client Alerts
  • September 04, 2020

The fluctuating workweek (FWW) pay plan remains a popular way for employers to manage overtime costs. Under the FWW, non-exempt employees are paid a guaranteed salary for all hours worked in a given week. If the employee works more than 40 hours, the salary is divided by the total weekly hours worked. The employee is then paid a half-time premium for each overtime hour worked during the week. This method can reduce overtime hours by two-thirds or more.

Over the past several years, employees have challenged the use of the FWW method on the basis that they work regular hours and, therefore, their time does not fluctuate. On Monday, the U.S. Department of Labor’s Wage and Hour Division issued an opinion letter that addresses one of these arguments. In the letter requesting the interpretation, the employer asked whether it can use the FWW method if the employee’ hours vary but never dip below 40 in any given week.

In response DOL explained that the FWW rules only require the employees’ hours to vary, even if that fluctuation always results in more than 40 hours worked in a week. As long as the employer meets all other requirements, it may continue to use the FWW pay method.

This interpretation follows most but not all federal court decisions on this issue. It does not directly address situations where employees work regular hours with no fluctuation at all, but it implies that this would disqualify employers from using the FWW. DOL also reminded employers that use the FWW that they may not make deductions from the guaranteed salary for things like tardiness, absences, or violation of disciplinary rules.