If your employer pays you a fixed salary and adds only half-time for hours over 40, it is using the fluctuating workweek method. Federal law allows that method only when your hours vary, the salary pays for every hour, you clearly understood that arrangement, and the salary covers minimum wage. Otherwise, the Fifth Circuit requires time and a half.
What is the fluctuating workweek method?
The fluctuating workweek is a way of paying overtime to a nonexempt worker who receives the same salary every week while the hours go up and down. The starting point is the Supreme Court's decision in Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942). Mr. Missel was a rate clerk paid a fixed weekly wage for hours that varied widely. The Court held that his regular rate for each week was his weekly wage divided by the hours he worked that week, so the rate changed from one week to the next.
The Department of Labor's regulation, 29 C.F.R. § 778.114, adds a second step. Because the salary is treated as straight-time pay for every hour, including the hours over 40, the employer adds only half of that week's regular rate for each overtime hour. Take a worker paid $1,000 a week who works 50 hours. The regular rate for that week is $20, which is $1,000 divided by 50. Half of $20 is $10, so the employer adds $10 for each of the 10 overtime hours, or $100. In a longer week the regular rate is lower, so the employer pays less for each overtime hour.
What conditions does my employer have to meet to pay me half-time overtime?
The current version of the regulation, 29 C.F.R. § 778.114(a), lists five conditions. The employer must meet all of them.
- Your hours actually fluctuate from week to week.
- You receive a fixed salary that does not change with the number of hours you work, whether few or many.
- The salary is large enough to pay at least the minimum wage for every hour you work in the weeks when you work the most hours.
- You and your employer have a clear and mutual understanding that the salary pays for all the hours you work each week, however many there are. The understanding does not have to extend to the specific method used to calculate overtime.
- You receive overtime, on top of the salary and any bonuses or premiums, of at least one-half your regular rate for every overtime hour.
The federal minimum wage is $7.25 an hour under 29 U.S.C. § 206(a)(1)(C). If the salary is too small to cover the minimum wage in your longest weeks, the employer does not meet the third condition. The regulation allows an employer to take occasional disciplinary deductions for willful absences, tardiness, or violations of major work rules, as long as the deductions do not cut into the minimum wage or overtime the law requires. An employer that reduces your salary because you worked fewer hours that week is not paying a fixed salary.
Can my employer pay bonuses or shift premiums and still use the fluctuating workweek?
Yes, under the current rule. The Department of Labor amended 29 C.F.R. § 778.114 in a rule published at 85 Fed. Reg. 34970, which took effect on August 7, 2020. The amended rule states that bonuses, premium payments, commissions, hazard pay, and other additional pay are compatible with the fluctuating workweek. It also states that those payments must be included in the regular rate unless the statute excludes them.
The law was different before the amendment. In Dacar v. Saybolt, L.P., 914 F.3d 917 (5th Cir. 2018), Saybolt paid oil and gas inspectors a salary under the fluctuating workweek and added extra pay for working on scheduled days off, offshore, and on holidays. The Fifth Circuit held that the extra pay made the inspectors' weekly straight-time pay vary with the kind of hours they worked, so the salary was not fixed and Saybolt could not use the method. The 2020 amendment changed that result. Under 29 U.S.C. § 255(a), an overtime claim must be filed within two years, or three years for a willful violation, so the 2020 version of the regulation was in effect for every pay period that a claim filed today can still include.
The amendment did not let employers leave the extra pay out of the overtime calculation. The fifth condition requires overtime of at least half of your regular rate, and your regular rate includes the bonus or premium. An employer that pays you a bonus and computes your half-time on the salary alone has not met that condition. I explain how bonuses are added to the regular rate in Bonuses and Your Overtime Rate.
What happens if my employer does not meet the conditions?
In the Fifth Circuit, which covers Texas, Louisiana, and Mississippi, the employer loses the right to pay half-time. The regulation permits the method only under the circumstances it lists. In Dacar, the Fifth Circuit held that use of the one-half multiplier depends on the employer showing that the fluctuating workweek applies. When the employer cannot make that showing, it owes overtime at one and one-half times the regular rate, which the court described as the ordinary calculation of overtime the law requires. One judge on the panel dissented on this point and would have allowed half-time damages. Courts outside the Fifth Circuit follow their own precedent on this question.
The next question is the regular rate itself. Under 29 C.F.R. § 778.113(a), the regular rate of a salaried worker is the salary divided by the number of hours the salary is intended to pay for. In Dacar, the inspectors received the same salary whether they worked 25 hours or 65, and the court divided by all the hours they actually worked. When the salary was meant to pay for a 40-hour week, the divisor is 40. The same worker paid $1,000 for a 50-hour week shows the difference:
- Half-time under the fluctuating workweek: $10 for each of 10 overtime hours, or $100.
- Time and a half, dividing the salary by all 50 hours: $20 times 1.5 is $30 an hour, or $300.
- Time and a half, with a salary meant for 40 hours: $1,000 divided by 40 is $25, and $25 times 1.5 is $37.50 an hour, or $375.
Which divisor applies depends on the facts of your job, including what you were told when you were hired, what your offer letter or handbook says, and the hours your pay stubs record. Under either measure, the employer owes at least three times what the half-time method pays for that week.
A different set of rules applies when an employer calls a salaried worker exempt and pays no overtime at all. I explain that situation in Am I Entitled to Overtime If I'm Salaried?.
How can I tell whether my employer is paying my half-time overtime correctly?
Start with your pay stubs. Check whether your salary went down in weeks when you worked fewer hours, because a salary that changes with your hours is not fixed. Check whether your hours actually change from week to week, or whether you work about the same schedule every week.
Think about what you were told when you were hired, and look at your offer letter and handbook. A statement that your salary is for a 40-hour week is evidence against the clear mutual understanding the method requires.
If you received bonuses, shift differentials, or other extra pay, add them to your salary for the week and divide by the hours you worked. Half of that number is the least your employer can pay for each hour over 40. If your stub shows half-time computed on the salary alone, the employer left the extra pay out.
Finally, divide your salary by your hours in your longest weeks. If the result is less than $7.25, the salary does not cover the minimum wage for those weeks.
What to do next
Keep your pay stubs, your offer letter, and any handbook pages that describe your salary or your schedule. Those documents show what the salary was meant to pay for. Write down your typical weekly hours. Then call me at (512) 799-2048 or contact me online for a free consultation. I handle these cases on a contingency fee, and if there is no recovery you pay nothing, not even the costs.
This post describes federal law in general terms. It is not legal advice about your own situation.