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May 13, 2010
Fluctuating Workweek Method of Pay Poses Cost-Saving Opportunities

In a BLR webinar titled "Reducing Overtime Costs: What You Legally Can—and Can't—Do to Keep Workers at Their Straight-Time Rates," Laura P. Worsinger, Esq., explained that fluctuating workweek is a method of complying with the Fair Labor Standards Act (FLSA) that also can save an employer money.

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How It Works

An employee is paid a fixed salary for all hours worked, whether the employee works less than 40 hours or more than 40 hours. In weeks in which the employee works more than 40 hours, the employee is paid an overtime premium for the extra hours.

The employer can save money using this method, because it is paying the employee a salary that involves fewer administrative costs, and any overtime premiums are paid at 50 percent of the employee's regular rate of pay.

However, because of the complex nature of the fluctuating workweek rules, employers considering this method of determining employees' pay should obtain professional legal guidance.

Certain Rules to Follow

To use this method of payment an employer must conform to certain rules summarized as follows:

  • There must be an understanding between the employer and the employee that the employee will be paid using the fluctuating workweek method.
  • The workweek of the employee must be a fluctuating one.
  • The employee must be paid a fixed salary regardless of the number of hours worked each week. (Employees who are paid an hourly wage do not qualify.)
  • The salary must be sufficiently large enough so that the regular rate of pay will never drop below the minimum wage.
  • In addition to his salary, the employee must be paid overtime premiums for any hours worked over 40 in the workweek. The overtime premium rate is 50 percent of the regular rate of pay for the workweek.

Note: With the exception of California, the fluctuating workweek method can be used in all states.

Laura P. Worsinger, Esq. is Of Counsel with the Los Angeles office of Dykema Gossett PLLC. She has broad counseling and litigation experience and specializes in the defense of employers in individual and class actions involving wage and hour violations, misclassification, discrimination, wrongful termination, and other employment-related proceedings. She can be contacted at lworsinger@dykema.com.

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