Tenth Circuit Endorses "Fluctuating Workweek" Method of Calculating Overtime for Misclassified Salaried Employees
In a decision that could lead to significant litigation cost savings for employers, the United States Court of Appeals for the Tenth Circuit recently endorsed the so-called “fluctuating workweek” method of calculating back pay awards for misclassified, salaried employees in lawsuits arising under the Fair Labor Standards Act (FLSA).
The FLSA provides that non-exempt employees are generally entitled to overtime pay at a rate of one and one-half times their regular rate of pay for all time worked in excess of 40 hours per week. 29 U.S.C. § 207(a)(1). When a non-exempt employee is paid a fixed salary and there is a “clear mutual understanding” that the salary is compensation for all hours worked each workweek (whether many or few), then: (a) the regular rate of the employee may be determined each workweek by dividing the salary by the number of hours worked in that week; and (b) payment for overtime hours at one-half that rate will satisfy the overtime pay requirement (because such hours have already been compensated at “straight time” via the salary itself). 29 C.F.R. § 778.114.
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