The Department of Labor (“DOL”) recently issued an opinion addressing whether the fluctuating workweek method of compensation may be used when an employee’s weekly hours fluctuate only above, and not below, 40 hours per week. The Fair Labor Standards Act (“FLSA”) requires that employers pay their employees overtime at one and one-half times their regular rate of pay for time worked in excess of 40 hours per workweek. An employer may, however, use the fluctuating workweek method if an employee works fluctuating hours from week to week and receives a fixed salary as straight time compensation for whatever hours the employee is called upon to work in a workweek. The employee and employer must agree to use the fluctuating workweek method. An employer using the fluctuating workweek method satisfies the overtime pay requirements of the FLSA if it compensates the employee, in addition to the salary amount, at a rate of least one-half of the regular rate of pay for the hours worked each overtime hour because the employee has received straight time compensation for all hours in the workweek.

The DOL concluded that there is no requirement that an employee’s hours worked fluctuate below 40 hours per week when using the fluctuating workweek method. In reaching this conclusion, the DOL reasoned the plain reading of the fluctuating workweek regulations only require that the employee’s hours fluctuate from week to week. But the regulations do not impose a requirement that the employee’s hours worked fluctuate below 40 hours per week. The DOL’s conclusion is consistent with the conclusion reached by many courts.

The opinion letter further re-affirmed a related point regarding deducting pay for employee absences. Generally, when using the fluctuating workweek method an employer may not deduct pay for absences taken by an employee. There is, however, an exception to this general prohibition for deductions related to an employee’s willful absences, willful tardiness, or infractions of major work rules. This exception has been explicitly incorporated into the recent amended fluctuating workweek regulations that were issued on May 20, 2020.

If you have any questions about these opinions or whether the fluctuating workweek method is attractive to your workplace in light of staggered or modified work schedules of employees due to COVID-19 pre-cautions, please feel free to contact Kemp Smith’s Labor and Employment Department at 915-533-4424.