posted on Tuesday, February 21, 2006 3:55 PM
by
Lou Michels
Beware the Jabberwock, er Fluctuating Workweek
The Fair Labor Standards Act contains any number of landmines for the unwary employer. In fact, if I have to pick a statute that is most likely being violated by employers, it's the FLSA. On top of its frequently counterintuitive requirements, the statute contains enticing overtime reduction devices like the fluctuating workweek that seem simple enough to put into effect, but ultimately end up looking like something out of Lewis Carroll.
A fluctuating workweek allows employers to pay a set wage for hours that vary from week to week. The employer and the employee must have a "clear mutual understanding" of the arrangement, and the employee receives a 50% overtime premium.
Fluctuating workweek arrangements are complicated and rarely understood by both sides. The pitfalls of using such an arrangement are amply demonstrated in the Florida case of Teblum v. Eckert Corp. of Florida, Inc., No. 03-495 (M.D. Fla. Feb. 7, 2006). Eckert is facing back overtime claims for approximately 2600 assistant managers because Eckert added illness, vacation and holiday time into the fluctuating workweek equation. The addition of this "non-worked" time reduces the hourly rate under the fluctuating workweek formula, and the corresponding overtime entitlement as well. While the employer stated that, in fact, it did properly calculate the overtime, the court found that the disagreement between the employer and the employees indicated that there was no mutual understanding of how the compensation was calculated. Accordingly, there is a jury issue as to whether the fluctuating workweek was properly utilized.
My experience with this payment schedule has been uniformly negative, mainly because of the difficulty in communicating the concept and its actual application to the workforce so that both sides have a clear understanding of what is involved. It is not uncommon to have payroll, human resources and in-house counsel each end up with different results as to the amount of money employees are entitled to using the same data. So beware the fluctuating workweek, unless your vorpal blade is particularly sharp.