Coming to a Federal Register near you: Proposed fluctuating workweek rules

Posted August 23, 2019

The U.S. Department of Labor (DOL) took the next step in crafting a rule regarding calculating overtime pay under the Fair Labor Standards Act (FLSA) for employees whose work hours fluctuate from week to week. Currently, this method is not available to employers who compensate their employees with bonuses or other incentive-based pay. The DOL proposes to revise these regulations to grant employers greater flexibility to provide additional forms of compensation to employees whose hours vary from week to week. What that flexibility will look like remains undisclosed at this time.

The proposed rule is now in the hands of the Office of Management and Budget, which has up to 90 days to complete its review. There is no minimum period for such a review. Therefore, we can expect to see the proposed rule before the end of the year. From there, the rule will be open for comment. The DOL must then review the comments and make any appropriate changes to the rule before publishing it as a final rule with an effective date. All this can take months, depending upon how many comments are received.

Notice of the proposed rule was included in the DOL’s Spring unified agenda, but it did not include a scheduled date for its release. The DOL might be working quickly to get the rule finished before the 2020 election cycle.

Fluctuating workweek overtime pay is a way to comply with the FLSA’s overtime pay requirements of time and half pay for all hours worked in excess of 40 in a workweek when an employee’s time fluctuates from week to week. Employers whose employees work a lot of hours part of the year and very little hours a week another part of the year usually use it. For example, fluctuating workweek overtime pay is often used by lawn maintenance companies and other seasonal industries.

Using the fluctuating workweek method to calculate overtime is legal as long as the following conditions are met:

• The employee must be on a guaranteed weekly salary which is paid to the employee as long as the employee performs any work in the workweek. No pay is required for a workweek in which the employee is out for the entire workweek and performs no work in that workweek. Pay periods can still be bi-weekly, semi-monthly, or monthly; but the work hours must be computed weekly to determine the hours worked each workweek. For this reason, pay periods are often either weekly or bi-weekly when an employee is on a fluctuating workweek overtime pay schedule, so the pay periods will correspond with each workweek.
• The hours of the employee must fluctuate from workweek to workweek. No rules, however, govern how much or how little the hours must fluctuate from workweek to workweek.
• The regular hourly rate of pay which is used to base the half time overtime rate must be at least the minimum wage.

To-do list

While the substantive changes in the proposed rule are not yet known, employers who have employees paid using the fluctuating workweek method should identify those employees and be ready to make amendments to the calculations and possibly to the payroll system to allow for the changes.

This article was written by Darlene M. Clabault, SHRM-CP, PHR, CLMS, of J. J. Keller & Associates, Inc.