Dive Brief:
- Employers may soon have greater clarity when it comes to overtime calculations for workers with fluctuating workweeks, thanks to a proposed rule announced by the U.S. Department of Labor (DOL) Monday.
- The Fair Labor Standards Act (FLSA) offers an overtime calculation that an employer can use for an employee whose hours fluctuate from week to week. Under this method, an employer may use a fixed salary; it then must determine the worker's regular rate based on his or her hours worked and use this to pay overtime — which the provision allows the employer to pay at half the worker's regular rate. Monday's proposal would make clear that employers using this method must include incentive-based pay, like bonuses and premium payments, in that calculation.
- The Notice of Proposed Rulemaking (NPRM) also includes examples of the types of payments allowed, and is subject to a 30-day public comment period.
Dive Insight:
The fluctuating workweek NPRM is one of several wage and hour regulatory updates proposed by the Trump administration, and one of the first to be announced following the confirmation of Secretary of Labor Eugene Scalia. DOL originally placed this item on its regulatory agenda in August.
Though use of the fluctuating workweek method isn't widespread, the rule still could affect a sizable portion of jobs. DOL estimated in its rulemaking that more than 700,000 U.S. workers meet a set of criteria that would allow them to be compensated under the method.
"This is welcome news for employers," Susan Harthill partner at Morgan, Lewis & Bockius and former DOL official, told HR Dive in an emailed statement. The proposal may lead more employers to consider a fluctuating workweek calculation for employees with irregular hours, she said. "On the other hand, DOL's guidance has been inconsistent and a final rule may be challenged on that basis, or a reviewing court may not give as much deference to the rule."
Employers also need to be mindful of state laws, as not all states recognize DOL's fluctuating workweek method, Harthill said. Employers may want to ask DOL in public comments to provide additional clarifications around the types of pay allowed under the proposal, she suggested.
In addition to the fluctuating workweek rule, employers are anticipating a proposal to update regular rate of pay requirements and preparing for the implementation of a new white-collar salary threshold for overtime pay. The latter has been finalized and will take effect Jan. 1. Employers have been advised to audit their classifications and determine how they'll handle workers newly eligible for overtime pay in order to ensure compliance.
