The Fluctuating Workweek payment method
The fluctuating workweek payment method, also known as a “variable workweek” or “half-time” method, is an area that most employees don’t know much about. Unfortunately, many employers don’t know too much about this pay practice either and end up making mistakes using it. Under the fluctuating work week method you end up making less money per hour the more you work.
The bad news is that this is a legal way to pay employees under the Fair Labor Standards Act (FLSA). The good news is that after reading this article you can usually pinpoint your employer’s mistake pretty easily and find out what to do if you have a wage and hour claim.
Standard Overtime Pay v. the Fluctuating Work Week
Standard Overtime Pay: Calculating overtime pay is to take your regular hourly rate and multiply it by 1.5. As an example, an hourly rate of $10 becomes an overtime rate of $15, regardless if you work 1 hour of overtime or 30 hours of overtime. It’s clean, simple and fair.
Fluctuating Work Week Pay (FWW): An employee is paid a fixed salary no matter how many hours are worked. When the employee works more than 40 hours in a week, the fixed salary is divided by the total number of hours worked.
So, an employee who is paid a fixed salary of $400/week and works 40 hours receives $10 per hour. However, when that same employee works 50 hours/week, he or she ends up receiving $8/hour ($400/50). The overtime rate is now 1.5 x $8 instead of 1.5 x $10. If the employee works 60 hours the overtime rate is 1.5 x $6.66 ($400/60 = $6.66).
The good news: 5 mistakes employers make when using the FWW.
As stated above, most employers make mistakes when using the fluctuating work week and, as a result, end up owing back wages to their employees. If there is a violation even in a few select pay periods you might be owed your entire back wages, not to mention double damages and attorney’s fees.
Employers must meet certain requirements in order to use this pay method:
– There must be a clear, mutual understanding that the employee’s fixed salary will cover all hours worked in a workweek, even if a small number of hours are worked.
– The employee must be paid a fixed weekly salary considered straight-time compensation for all hours worked in a workweek if the employee performs any work in the workweek.
– The employee’s hours must fluctuate from workweek to workweek.
– The regular hourly pay rate used to base the half-time overtime rate must not fall below federal minimum wage regulations.
1. Violation: We identify weeks where the employee worked less than 40 hours and was not paid the salary
2. Violation: We identify bonuses, shift pay, holiday pay, commissions or some other additional compensation that means the employee is not receiving a “fixed salary.”
3. Violation: We find that there was a complete lack of communication between the employer and employee regarding the use of the fluctuating work week. A signed document might not be enough, but no signed document is a good sign a violation has taken place.
4. Violation: We find weeks where the employee worked so many hours that the rate falls below minimum wage. In my example above the $6.66 rate is below the $7.25 federal minimum wage.
5. Violation: We find that the work schedule in fact does not fluctuate from week to week. An hour variance here and there is not enough.
Whether you work in Texas, Illinois, California, New York or some other state, if you are compensated under the fluctuating work week method, it is worth it to have an employment lawyer review your pay stubs to check for any violations. Our law firm frequently finds that many employees paid by the fluctuating workweek method are victims of wage scams.