Flex Pay

Many workers’ work schedules vary from week to week, both in terms of schedules and the total number of hours worked. The law allows employers whose employees work fluctuating workweeks several options for compensating those workers. Other methods for paying fluctuating-workweek employees, however, run afoul of the Fair Labor Standards Act. A knowledgeable Atlanta wage and hour lawyer can help determine if your method is compliant with the law and, if not, what the next steps should be.

While not technically a fluctuating-workweek matter, a recent federal court case from Pennsylvania offers an example of an employer who dealt with an employee’s changing schedule in a way that was permissible under the law.

The employee, S.W., was a direct care worker working for a home care company. Before she started with the employer, she signed a “Rate Sheet” that said her pay would be $11 per hour. The sheet, however, also said that her hourly wage could change if her hours went up or down.

Under the Fair Labor Standards Act, nonexempt employees are entitled to overtime at a rate of one and one-half times their regular hourly rate for hours worked in excess of 40 per week. However, it is possible for a nonexempt employee to be paid on a “salary” basis, in which case the employee may receive only one-half times the regular rate for hours worked in excess of 40 per week. This method is called the “fluctuating workweek” (or “flex-pay”) method of calculating overtime (though sometimes it is unfortunately referred to as “Chinese Overtime”). The premise of flex-pay is fairly straightforward: because a nonexempt employee received a salary as compensation for all hours worked, the employee has already been paid all wages at the regular rate for all hours worked, including hours worked over 40. Accordingly, only the additional half-time overtime rate is owed for hours worked over 40. Flex-pay gets its name(s) because, when an employee is paid on a salary basis, the regular rate will fluctuate based on the number of hours worked. Notably, the more hours an employee works, the lower the regular rate (and the overtime rate) will go. Consider the following examples:

Articles Posted in Flex Pay

Flex Pay, Fluctuating Workweeks, and How the Fair Labor Standards Act Impacts Workers Working Those Kinds of Jobs

Overtime and the Fluctuating Workweek