Dive Brief:

• A plastic packaging company's bonus payments did not preclude it from using the fluctuating workweek method for calculating workers' pay, the 11th U.S. Circuit Court of Appeals concluded in reversing and remanding a district court's earlier ruling (Hernandez v. Plastipak Packaging, Inc., No. 19-12655 (11th Cir., Oct. 13, 2021)).
• The packaging company paid a technician a fixed biweekly salary of $1,964.99. His hours fluctuated: Sometimes, he worked fewer than 40 hours, and other times, he worked more. When he worked more than 40 hours, the company divided his weekly salary by 40 and multiplied that figure by the number of overtime hours he worked — "a more generous version of the fluctuating workweek method," the court noted. The company also paid the technician a shift premium, which he earned when he worked night shifts, and holiday pay, a setup that awarded him eight hours' pay when he didn't come in on a holiday and eight hours' extra pay on top of what he earned if he did work a holiday.
• The worker sued the company in 2017, alleging it failed to pay him time and one-half for his overtime hours. A district court granted him summary judgment, ruling that his employer couldn't use the fluctuating workweek method because it gave him shift differentials and bonuses. The 11th Circuit disagreed.

Dive Insight:

The 11th Circuit began its analysis by reviewing the fluctuating workweek method. The Fair Labor Standards Act requires employers to pay nonexempt employees time and a half their regular rate for all hours worked beyond 40. But some workers are paid a fixed salary — as opposed to an hourly rate — and work fluctuating hours. In this circumstance, employers can use the fluctuating workweek method to calculate overtime pay. 

Using this approach, employers "need only pay for overtime hours at a rate of one-half times the employee's regular rate — not at one and one-half times," the court said.

The court illustrated the method with an example. If an employee with variable hours receives a fixed weekly salary of $1,000, her regular rate in a week where she works 50 hours is $20, and she'd be entitled to overtime pay for 10 hours. The employee would have earned $100 in overtime pay. 

"Although this employee's overtime pay is lower compared to an employee whose overtime pay is calculated using the time and one-half method, the tradeoff is she still earns her full $1,000 fixed salary even in weeks where she works less than forty hours," the court said.

But the 11th Circuit's decision did not center on overtime pay calculation as much as whether the employer used the fluctuating workweek method inappropriately. 

The plaintiff argued that his salary was not fixed because every single payment — the shift and holiday bonuses — was part of his salary. "But this isn't right," the court opined. "The compensation an employee receives is not the same as the fixed salary; the salary is a subset of the employee's compensation."

"[The plaintiff's] hours fluctuated but his salary didn't," the court went on to say. "He received his full fixed salary regardless of whether he worked five hours in a workweek or fifty. This salary arrangement was sufficient to provide compensation to [him] at a rate not less than the applicable minimum wage rate for every hour worked in those workweeks."