UPDATE: June 8, 2020: The rule will take effect Aug. 7, 2020, the U.S. Department of Labor announced in the Federal Register.

Dive Brief:

• The U.S. Department of Labor (DOL) published a final rule May 20 that updates the Fair Labor Standards Act (FLSA) regulations guiding how employers calculate overtime pay for workers with fluctuating workweeks.
• In what the agency has deemed a "deregulatory action," DOL clarified that bonuses, premium payments and "other additional pay of any kind" aren't incompatible with the law's fluctuating workweek arrangement but must be included when calculating overtime pay for those salaried, non-exempt employees whose hours vary from week to week.
• The final rule includes additional examples for calculating overtime where an employee is paid a nightshift differential, a productivity bonus or premium pay for weekend work. The rule takes effect 60 days after the date of publication in the Federal Register.

Dive Insight:

Word that DOL was revising its rule was noted as "welcome news" for employers, as the changes may clarify regulations in such a way as to encourage more employers to adopt a fluctuating workweek calculation for employees with irregular hours.

DOL also said the rule will allow employers and employees to better utilize flexible work schedules and will make it easier for employers and employees to agree to unique scheduling arrangements while allowing employees to retain access to bonuses and premiums they would otherwise earn. "This is especially important as workers return to work following the COVID-19 pandemic," DOL said. "Some employers are likely to promote social distancing in the workplace by having their employees adopt variable work schedules, possibly staggering their start and end times for the day."

DOL issued a rule in 2011 on the subject "but the fact patterns were read too literally by some courts to mean other payments were inconsistent with this pay structure," Caroline Brown, of counsel at Fisher Phillips, told HR Dive in an email. "This had led to a mix of holdings in different jurisdictions as to whether more overtime pay was due on the salary component."

Employers that seek to use the fluctuating workweek calculation should note that it is not an exemption from the FLSA's requirements, but the rule could nonetheless provide employers a better way to budget labor costs, Brown said.

Not all states permit a fluctuating workweek, she added. In fact, DOL's proposal met opposition in December 2019 from a coalition of 18 state attorneys general, who said the rule would "create unnecessary confusion for employers, potentially leading them to violate state laws and needlessly exposing them to costly enforcement actions."