Professional Service Agreement

The Fluctuating Workweek Overtime Calculation Cannot Be Used If Incentives Are Paid

November 19, 2018

An employer that paid weekly incentives for off-day, offshore, and holiday hours was disqualified from using the fluctuating workweek (FWW) method of calculating overtime. Under the Fair Labor Standards Act, the FWW may be used when an employee works hours that fluctuate from week to week. The employee and employer can agree that the employee will receive a fixed weekly salary that constitutes straight time pay for all hours worked in a week (including those over 40), and will receive overtime pay at one-half the hourly rate (rather than one and a half times the hourly rate). Because the hours fluctuate while the weekly rate stays the same, the hourly rate also fluctuates, decreasing as the hours worked increase. In Dacar v. Saybolt, the employer paid the above-mentioned incentives, which were added to the weekly base salary. The Fifth Circuit found that these payments caused the weekly salary to vary, in violation of the requirement for a fixed weekly salary. Accordingly, the employer was disqualified from using the FWW method.