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DOL Seeks To Undermine Fluctuating-Workweek Plans
April 8, 2011 08:17
by John E. Thompson & Lawrence S. McGoldrick
The U.S. Labor Department's April 5 Final Rule attempts to transform the principles of fluctuating-
workweek pay plans in two ways . Remarkably, DOL apparently plans to do so, not by facing up to
these matters by actually proposing a straightforward revision of the relevant interpretative provision
at 29 C.F.R. § 778.114, but instead via remarks in the preamble accompanying the Final Rule.
The Basic Concepts
A non-exempt employee's FLSA overtime pay must be based upon his or her regular hourly rate. This
is determined by dividing the employee's total compensation for a workweek by the total number of
hours worked for which the compensation was paid. See 29 C.F.R . § 778.109.
Under a fluctuating-workweek plan, the employee receives a salary that is pai d as straight-time
compensation for all of his or her hours worked in a workweek, however many or few, including hours
worked over 40. Thus, for overtime hours, the employee is due only an additional one-half of the rate
obtained by dividing all of the workweek's hours into the salary (this rate can never be less than the
minimum wage, of course). The employee's regular hourly rate therefore fluctuates, that is, it
decreases as his or her hours worked increase, and vice versa. The employee is also due additional
overtime premium for most other compensation he or she receives for an overtime workweek.
It is worth emphasizing from the outset that Congress has given no generalized regulatory authority
to DOL where the FLSA's overtime requirements are concerned. See, e.g., Reich v. Interstate Brands
Corp., 57 F.3d 574, (7th Cir. 1995), cert. den., 516 U.S. 1042 (1996). Thus, the fluct uating-
workweek method is not some exception, exemption, or DOL-conferred dispensation. See, e.g., Davis
v. Friendly Express, Inc., 2003 WL 21488682 (11th Cir. 2003); Samson v. Apollo Resources, Inc.,
242 F.3d 629 (5th Cir. 2001); Dooley v. Liberty Mutual Insurance, 307 F.Supp.2d 234 (D. Mass.
2004). Instead, Section 778.114 simply acknowledges the arithmetical realities of applying the basic
regular-rate rule in one set of circumstances. Notwithstanding the misinformed approaches of some
courts in recent times, Section 778.114 does not (and may not) represent a set of prerequisites for
using fluctuating-workweek pl ans. "The fluctuating workweek doctrine is not a benefit to be withheld
. . ., but rather is an interpretive tool to give effect to the understanding of the parties." Dooley v.
Liberty Mutual Insurance, supra.
Other Pay Besides The Salary
DOL's comments say that employers who rely upon fluctuating-workweek plans for non-exempt
employees may not also pay these workers bonuses, premium payments, or other additional
amounts. This is supposedly "inconsistent" with paying on a fluctuating-workweek basis. This is a
complete reversal of the views expressed in 2008, when the Bush administration's Wage and Hour
