One way that many employers are guilty of wage theft is in the use of fluctuating, or changing, work weeks in an illegal manner to cheat their employees out of their legal wages. Darren Rumack, who is in charge of Wages & Hour cases at the Klein Law Group, has written a guide for when the fluctuating work week is legal and when it is not legal and constitutes wage theft.
The Fluctuating Work Week (“FWW”) is an alternative method of calculating overtime permitted by the Fair Labor Standards Act. Though based on a federal regulation, the FWW is lawful in New York State. Traditionally, overtime is paid at a rate of 1.5 times the hourly rate for all hours worked over forty (40) per week. With a fluctuating workweek method, a salary is paid for all hours worked, with an overtime premium of 0.5 times the hourly rate for all hours worked after forty (40) per week.
When An Employer May Use The Fluctuating Work Week
Employers seeking to utilize the FWW must meet the following requirements:
•1. The employee’s hours must regularly fluctuate from week to week;
•2. The employee must receive a fixed salary that does not vary according to the hours worked each week;
•3. The fixed weekly amount must exceed the minimum wage when divided against the number of hours worked in any given week;
•4. The employer and employee must have a clear and mutual understanding that the employer will pay a fixed salary regardless of the hours actually worked.
•5. The employee receives a “half-time” (0.5) premium for all hours worked over forty (40) per week in addition to the fixed salary.
Although not required by the regulation, many courts suggest that the agreement be reduced to writing as evidence of a “clear and mutual understanding.”
When The FWW Is Illegal:
•1. The employee’s weekly hours do not fluctuate on a regular basis;
•2. The employee’s weekly salary is not high enough to keep his hourly salary above the minimum wage;
•3. The employer and employee do not have a clear understanding that there will be a fixed salary regardless of hours worked;
•4. The employer gives bonuses based on hours worked, such as premiums for night-shift hours (note: performance-based bonuses are permitted under the FWW, because they do not cause the employee’s weekly salary to vary by hours worked).
The regulation provides the following example:
The employer and employee reach the following understanding:
•· The employee works no more than 50 hours per week, and is paid $600.00 per week with the understanding that it constitutes the employee’s compensation, except for overtime premiums, for whatever hours are worked in the workweek.
•· If during the course of 4 weeks this employee works 40, 37.5, 50, and 48 hours, the regular hourly rate of pay in each of these weeks is $15.00, $16.00, $12.00, and $12.50, respectively.
•· Since the employee has already received straight-time compensation on a salary basis for all hours worked, only additional half-time (0.5) pay is due.
•· For the first week the employee is entitled to be paid $600.00; for the second week $600.00; for the third week $660.00 ($600.00 plus 10 hours at $6.00); for the fourth week $650.00 ($600.00 plus 8 hours at $6.25).
Researched and prepared by Darren Rumack, Klein Law Group.