• The Price of Non-Compliance with the Fluctuating Workweek Method of Overtime Calculation
  • May 5, 2010 | Author: Noel P. Tripp
  • Law Firm: Jackson Lewis LLP - Melville Office
  • Under the FLSA (and most state laws), the fluctuating workweek method (FWW) of overtime payment allows employers to reduce overtime expense by paying “half time” for all overtime hours if the following four factors are satisfied: 1) employees’ hours fluctuate from week; (2) employees receive a fixed salary each week that does not vary with the number of non-overtime hours worked during each workweek; 3) the fixed salary provides compensation every week at a regular rate that is at least equal to the minimum wage, and 4) the employer and employees’ share a “clear mutual understanding” that Defendants will pay that fixed salary regardless of the number of hours worked.

    However, as demonstrated by last week’s decision by United States District Court Judge Jose L. Linares of the United States District Court for the District of New Jersey, an employer who sets out to utilize the FWW approach pays a strict penalty for non-compliance. See Brumley v. Camin Cargo Control, Inc., 2009 U.S. Dist. LEXIS 126785 (D.N.J. Apr. 20, 2009).

    In his decision, Judge Linares denied summary judgment to defendants in this collective action based on the employer having made one impermissible deduction to one employee.   The Court rejected the employer’s argument that an isolated event of this type was statistically insignificant, stating that such an assertion goes to “weight.” More importantly, the Court granted summary judgment to the plaintiffs based on the employer making additional payments to employees, such as offshore pay, holiday pay and day-off pay, finding that due to such payments, the employer did not pay the fixed salary required to utilize the FWW overtime calculation method.

    The negative implications of this decision did not end here.   In evaluating potential damages, the Court rejected the employer’s argument that damages should be calculated based on the half-time method that is part and parcel of the FWW calculation of overtime and held that “the default FLSA damage calculation, ‘time-and-a-half for all hours over 40,’” should apply to Plaintiffs who were not paid properly. The Court also denied summary judgment to both parties as to whether FLSA liquidated damages and a 3-year statute of limitations should be imposed, finding that trial testimony is necessary to determine whether the employer acted in good faith and took reasonable steps to comply with the FWW calculation methodology. Finally, citing to the FLSA regulations and precedent within the Third Circuit, the Court rejected the employer’s argument that overpayments from different pay periods be applied to offset liability.

    Employees who avail themselves of the fluctuating workweek method of overtime should ensure they are properly implementing its requirements.