In an opinion letter issued on August 31, 2020, the U.S. Department of Labor restated its position that an employee’s hours need not fluctuate above and below 40 hours to qualify for the fluctuating workweek (“FWW”) method of calculating overtime pay in 29 C.F.R. § 778.114.

Under the FWW method of pay, an overtime-eligible employee whose hours fluctuate from week to week and who agrees to receive a fixed weekly salary covering all hours of work is entitled to a halftime premium for hours worked in excess of 40 per week—not a time-and-a-half premium.  The rationale is that the employee, by virtue of the fixed salary covering all hours of work, has already been paid the “straight-time” component of pay for the hours over 40.  Accordingly, all that remains for the employer to pay is the “half” in the colloquial “time and a half.”  The FWW principles were first articulated by the Supreme Court in Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942).  In 1950, the DOL codified the rule in the federal regulations.  The rule requires hours that fluctuate from week to week; a fixed salary that does not vary with the number of hours worked; a salary sufficiently large to cover the minimum wage; and a clear mutual understanding between employer and employee that the employer will pay the fixed salary regardless of the number of hours worked.  If these requirements are met, the employer computes the regular rate by dividing the weekly salary by the total number of hours worked that week, and satisfies its overtime pay obligation by paying a premium equal to half that amount for each overtime hour worked.  In the many states where it is permitted, the FWW method is a powerful tool for employers seeking to manage overtime costs for salaried non-exempt employees.

The DOL has long held that the FWW method does not require that an employee’s hours of work fluctuate below 40 hours per week.  It confirmed as much in the June 2020 final rule amending § 778.114, as well as in prior opinion letters.  This most recent opinion from the agency makes clear that the FWW method is appropriate even when the employee always works more than 40 hours per week.  A number of federal courts of appeal have agreed, including (in June 2020) the Second Circuit in Thomas v. Bed Bath & Beyond, Inc.  

Under the Fair Labor Standards Act, employers can rely on DOL opinion letters as defenses to claims for overtime pay.  Specifically, “no employer shall be subject to any liability … on account of the failure … to pay … overtime compensation … if [it] pleads and proves that the act or omission complained of was in good faith in conformity with and in reliance on any written … ruling, approval, or interpretation …  of the [Administrator of the Wage and Hour Division of the Department of Labor]….  Such a defense, if established, shall be a bar to the action or proceeding].”  See 29 U.S.C. § 259(a).  The August 31 opinion letter is an official ruling or interpretation for purposes of this good-faith reliance defense.

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Photo of Allan Bloom Allan Bloom

Allan Bloom is the co-chair of Proskauer’s Labor & Employment Law Department and a nationally recognized litigator and advisor who represents employers, business owners, and management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended…

Allan Bloom is the co-chair of Proskauer’s Labor & Employment Law Department and a nationally recognized litigator and advisor who represents employers, business owners, and management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended many of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration, before government agencies, and in private negotiations. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York Times, Reuters, Bloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved billions of dollars in potential damages.

Allan is regularly called on to advise operating companies, management companies, fund sponsors, boards of directors and senior leadership on highly sensitive matters including executive and key person transitions, internal investigations and strategic workforce planning. He has particular expertise in the financial services industry, where he has litigated, arbitrated, and mediated disputes for more than 20 years.

A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA), Employment Discrimination Law (ABA/Bloomberg BNA), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE).

Allan has served as longtime pro bono counsel to Lincoln Center for the Performing Arts and The Public Theater, among other nonprofit organizations.  He is a past Vice Chair of Repair the World, a nonprofit organization that mobilizes volunteers and their communities to take action to pursue a just world, and a past recipient of the Lawyers Alliance Cornerstone Award for extraordinary contributions through pro bono legal services.

Allan is a Fellow of the College of Labor and Employment Lawyers and has been recognized as a leading practitioner by Chambers since 2011.