Provided by: Judge Ruth B. Kraft


Few employers understand the meaning of a fluctuating workweek in employment law. For me, it raises loads of problems, not in whether you can legally require a non-exempt, or hourly, employee to work 40 hours one week and 35 the next, but in terms of defining overtime pay. Basically, if a non-exempt employee works more than 40 hours in a single workweek, you are required to pay them at time and a half.

But, there is an exception to this rule called the Fluctuating Workweek Method. It is tricky however and extremely difficult to meet the legal conditions. As a consequence, I do not advocate its use to my clients because I know that the odds of tripping up are high and the consequences severe. The five mandatory conditions are:

1. The employee’s hours fluctuate from week to week regularly, not occasionally.
2. You pay the employee the same fixed weekly salary regardless of the number of hours he works in any given week, exclusive of any overtime pay due. Therefore, you pay the worker a $500 wage regardless of whether he works 42, 30 or 50 hours during the week.
3. When the fixed amount is divided by the number of hours worked in a given week, it cannot produce a regular rate of pay which falls below the minimum wage.
4. You and the employee have a clear mutual understanding that you are paying a fixed salary regardless of the number of hours worked.
5. Finally, you pay the employee a 50% overtime premium in addition to the fixed weekly salary for each hour worked over 40 hours in the workweek, commonly referred to as the “halftime” rate. This is added to the fixed salary.

In some circumstances, you will come out ahead. So why not adopt this method all the time? First, the conditions are hard to fulfill. Most employers do not have a workforce whose hours fluctuate regularly or your pay practices, such as night shift pay, modify the fixed salary. Second, this is a great way to discourage employees from putting in overtime. Third, it is a monumental administrative headache. Finally, if a worker thinks that he has been “cheated” out of overtime pay and reports you to the Department of Labor, audits are costly and time-consuming fishing expeditions.

Let me show you an example: just recently, a New York federal district court ruled that Radio Shack properly used the fluctuating workweek methodology. It paid non-exempt store managers a base salary for all hours worked, plus overtime at the halftime rate as well as non-discretionary quarterly and year-end bonuses tied to performance metrics. The question before the court was whether the managers had received a fixed weekly salary, given those bonuses. The court found that the bonuses were “untethered” to the number of hours they worked. Had the bonuses been related to hours-either working weekends, nights or holidays-then the weekly rate would not have been fixed. Other circuit courts have taken the opposite approach. I will add that I tried several cases brought against Radio Shack precisely because it had misclassified store managers as non-exempt, rather than hourly employees! That issue was not before the court in the recent Wills class action suit but raises enormous red flags for enforcement agencies.

The bottom line is that this is one extremely technical strategy which requires serious discussion with employment counsel before adoption.
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Contact Jennifer at Jennifer@Kirschenbaumesq.com or at (516) 747-6700 x. 302.