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Labor Department Opinion on “Fluctuating Workweek” Overtime Rule Impacts Some New Jersey Workers

The federal Fair Labor Standards Act (FLSA) sets a nationwide minimum wage and a standard for overtime compensation. While some states, including New Jersey, have enacted their own minimum wage laws, both federal and New Jersey overtime laws require employers to pay non-exempt workers at one-and-a-half times their regular rate of pay when they work more than forty hours in a week. This applies to workers who receive an hourly wage and those who are salaried, as long as they are not exempted by the FLSA. The Wage and Hour Division (WHD) of the U.S. Department of Labor has developed rules for determining the regular rate of pay of salaried employees. In August 2020, it issued an opinion letter, designated FLSA2020-14, which answers questions about the “fluctuating workweek” (FWW) method of calculating overtime. Workers in a dispute with their employer about overtime rules would be wise to consult with a New Jersey employment lawyer as soon as possible.

The overtime provisions of the FLSA state that employers must pay overtime “at a rate not less than one and one-half times the regular rate at which [an employee] is employed.” 29 U.S.C. § 207(a)(1). These provisions do not apply to employees deemed “exempt” by the FLSA. This includes individuals “employed in a bona fide executive, administrative, or professional capacity,” certain employees in the fishing and agriculture industries, and others. Id. at § 213(a).

Calculating overtime pay is rather straightforward for workers who receive an hourly wage. If an employee receives $12 per hour for a forty-hour workweek, their overtime rate of pay would be $18 per hour. When a non-exempt employee receives a fixed salary, the WHD has developed different systems for those who work a fixed number of hours and those whose hours vary from one week to the next. An employee’s regular rate of pay is equal to their weekly salary divided by the number of hours they work, which is easy to do if they always work the same number of hours. See 29 C.F.R. § 778.113(a).

The FWW method addresses situations where an employee works a different number of hours each week. The WHD introduced the FWW method in 1940. Its most recent revisions to the FWW rule took effect on August 7, 2020. See 85 Fed. Reg. 34970 (Jun. 8, 2020), 29 C.F.R. § 778.114(a). Employers may use the FWW method for employees who meet a five-part test:
1. The employee’s weekly hours vary;
2. The employee’s salary is fixed, regardless of the number of hours worked;
3. This fixed salary is equal to or greater than the minimum wage for the employee’s longest workweeks;
4. A “clear and mutual understanding” exists between the employer and the employee that their salary is not tied to the number of hours worked; and
5. The employee receives overtime pay equal to one-half of the employee’s hourly rate of pay, based on the total number of hours worked that week, for hours in excess of forty.

An employer using the FWW method is therefore only responsible for paying the “half” of “time-and-a-half.”

In FLSA202-14, the WHD addressed the question of whether the FWW method is only available when an employee’s hours “fluctuate above and below 40 hours per week.” It concluded that employers may use the FWW method even when an eligible employee consistently works more than forty hours per week.

The employment attorneys at the Resnick Law Group practice in New Jersey and New York. Please contact us today online, at 973-781-1204, or at 646-867-7997 to schedule a confidential consultation.

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