Andre services machinery at an auto manufacturer. When everything is in working order, our hypothetical employee works fewer than 20 hours per week. But breakdowns can multiply, and Andre sometimes logs as many as 60 hours.

When Andre started working at the plant, his supervisor told him he'd receive a fixed salary. The salary wouldn't change from week to week, even when his hours shifted.

The supervisor said Andre wouldn't be paid overtime. After an uptick in machinery issues and 60-hour workweeks, Andre grew frustrated with his paychecks. Was it true that his fixed salary was incompatible with overtime pay? Or did his supervisor make a mistake?

To answer this question, I reached out to Stephanie J. Lowe, associate at Liebert Cassidy Whitmore. She broke down the basics of the fluctuating workweek method — that's the official name for the way Andre is paid. She also addressed Andre's question. Spoiler alert: the fluctuating workweek method doesn't give employers an overtime pass.

When can employers use the fluctuating workweek method?

The Fair Labor Standards Act created the fluctuating workweek method, Lowe said. It allows employers to pay a nonexempt worker — someone who is owed overtime — with varying hours a fixed salary.

Employers can use the fluctuating workweek method under certain "really specific situations," Lowe said.

"You can't just freely decide to pay a nonexempt employee a salary," she said. "You'd have to check that they meet the requirements of the fluctuating workweek method."

There are four main requirements employers need to meet to use the method:

1. Fluctuating hours

It may seem obvious, but it's a key requirement of the method: workers paid by the fluctuating workweek method must have fluctuating hours. One week, they may work 15 hours. The next week, they may work 50.

The U.S. Department of Labor, which enforces the FLSA, hasn't created a legal definition of the fluctuating workweek. There is no set number of hours by which workweeks need to vary to qualify as fluctuating. But in general, Lowe said, a worker needs to have a nonpredictable schedule.

2. Fixed salary

Another essential part of the fluctuating workweek method is a fixed salary.

An employee's pay must remain the same, no matter how many hours they work — though overtime is an important caveat to this rule. "Employees are paid a certain salary whether they work four hours or forty hours," Lowe said. "That's how much they get."

3. Minimum wage

Employers still need to pay attention to workers' hourly rates — even with a fixed salary, the rate can't dip below minimum wage. 

When setting a fixed salary under the fluctuating workweek method, employers need to consider the maximum amount of hours an employee could work. The hourly rate produced by dividing the salary by the maximum number of hours must meet minimum wage standards.

"If the number is less than minimum wage, you're going to have a really weak argument for using the method," Lowe said.

4. "A clear and mutual understanding" 

There's one more requirement of the fluctuating workweek method: "The employee and employer have to have what the regulations call 'a clear and mutual understanding' of the fixed salary — the way the employee is compensated," Lowe said.

Employers need to tell workers they're using the method. While unionized employers don't typically use it, Lowe said, they would need to draft an agreement spelling out the terms. In the private sector, the agreement could look like an employment contract.

"Whatever it is, the employee has to understand," Lowe said. "It should all be documented in writing."

Overtime challenges

Overtime is the most common challenge employers face in implementing the fluctuating workweek method. 

"On a general basis, an employer might be drawn to looking into using the method because they think it will be a lot easier to pay a nonexempt employee with fluctuating hours a fixed salary," Lowe said. "But what a lot of employers might not catch is that this does not relieve the employer of paying the employee overtime compensation."

Nonexempt workers paid a fixed salary under the method are still nonexempt, Lowe pointed out. Employers are still required to pay them overtime. 

"We're not turning nonexempt employees into exempt employees who are paid a salary," Lowe said.

When using the method, employers need to track employees' hours to make sure they are paid overtime for all hours worked beyond 40. The instruction may sound familiar; it's the same threshold the FLSA uses to determine when overtime is due for other nonexempt workers. The FLSA tells employers to use a different formula, however, to calculate the overtime rate when using the method.

Overtime pay under the fluctuating workweek method "is based on the average hourly rate produced by dividing the employee's fixed salary and any non-excludable additional pay … by the number of hours actually worked in a specific workweek," DOL said in a fact sheet. "The employee then receives at least an additional 0.5 times (or additional 'half time') that rate for each hour worked beyond 40 in the workweek."

The trickiest part of this calculation, Lowe said, is determining the regular rate. "Because of the fluctuating nature of their work, employees are going to be working a different number of hours week to week. The employer is going to have to do some math to determine their rate week to week."

Another complicating factor? Specialty pay. Payments coming in the form of bonuses, hazard pay, bilingual pay and other special payouts will complicate the math, Lowe said.

Keep in check with state laws

While potential overtime violations will likely lead fluctuating workweek lawsuits, Lowe flagged one other potential risk. Employers using the method must make sure it doesn't cause them to infringe upon state and local laws, she said.

"Sometimes paying a nonexempt employee a salary may make it harder to comply with state wage and hour laws," she said.

Section 226 of the California labor code, for example, requires employers to record the number of hours worked on workers' pay stubs. But an employer using the fluctuating workweek may think it simply needs to issue the fixed salary and disregard the hours worked.

"It may not be a lawsuit issue," Lowe said. "But when we counsel employers, we recommend they're still in compliance with state law."