Does your fire department use the fluctuating workweek method (FWW) of overtime compensation? A recent federal appeals court decision may have you looking for an alternative.
Recently, the Fifth Circuit Court of Appeals limited the ability of some employers to use the FWW method of overtime compensation. Before we can discuss recent developments, let’s explain the FWW, and why you either love it or hate it . . .
What is the Fluctuating Workweek Method of Overtime Compensation?
The FWW requires the employer and employee to reach a “clear and mutual understanding” that a fixed salary covers all hours worked in a week. The employee is still eligible to receive overtime for hours worked over the statutory maximum (i.e., hours worked more than 40 in 7 days). But since the salary is intended to compensate the employee for all hours worked (even overtime hours), the employee does not receive the typical time and one-half for overtime hours. Instead, the employee receives “half pay,” or one-half of his or her regular rate for overtime hours.
Confused? You are not alone. Here is how it works:
- Employee A is paid a salary of $800 per week. A works 30 hours one week and is still paid $800. A’s regular rate is $26.67 per hour that week. The regular rate is determined by dividing weekly salary by the hours worked that week.
- The next week, A works 42 hours. A’s regular rate is reduced to $19.05 per hour. This second week, A receives $800 plus 2 hours of overtime. But since the $800 covers all hours worked, A receives only one-half of his or her regular rate for the 2 overtime hours. Therefore, A receives a total of $819.05 for that week.
Pretty straightforward . . . but the next scenario illustrates whether you either love or hate FWW . . . (BTW, this probably depends on which side of the table you sit on.)
- The following week A works 60 hours. A’s regular rate is reduced to $13.33 per hour. A is entitled to only $133 in overtime for 20 hours of work! A works 60 hours and only receives $933 total for the week. A’s regular rate decreases as hours worked increase; the more hours A works, the lower the regular rate.
The DOL has established strict requirements that govern the FWW method of overtime compensation. They can be found at 29 C.F.R. §778.114 and include the following:
- The employee must be paid on a salary basis;
- The hours must fluctuate from week to week;
- There must be a clear and mutual understanding that the fixed salary is compensation for all hours worked (not including overtime premiums) in the workweek; and
- The salary must be sufficient to provide compensation of at least minimum wage, no matter how many hours the employee may work.
We could easily write page after page on the “ins and outs” of FWW. However, for this post we will just look to the new developments out of the Fifth Circuit.
Fifth Circuit’s View of Fluctuating Hours
As listed above, one of the requirements of the FWW is that an employee’s hours must fluctuate. In 1998, the Fourth Circuit Court of Appeals found Wake County, North Carolina could utilize the FWW for EMTs who worked fixed fluctuating hours. The EMTs’ work hours consisted of fixed 48- or 72-hour workweeks. The EMTs were paid overtime (or one-half of the regular rate) for all hours worked over 40 each week, but they argued that fixed fluctuating work hours did not meet DOL FWW requirements. The Fourth Circuit did not agree with the EMTs. They found the FWW was applicable to fixed fluctuating work hours.
Now, fast forward to 2017 . . . The Fifth Circuit Court of Appeals recently rejected the Fourth Circuit’s opinion regarding fixed fluctuating hours and the FWW. The case, entitled Hills v. Entergy Operations, Inc., involved security guards at an energy facility in Louisiana. The guards claimed they worked an alternating fixed schedule of either 36 or 48 hours per week. Additionally, the guards argued the salary paid was only intended to compensate them for a fixed number of hours, not an “unlimited” number of hours as required by regulations governing FWW. The court found a “biweekly alternating, but fixed, schedule is not necessarily ‘fluctuating’ as that term of art is used in the fluctuating workweek method” of overtime compensation.
The Fifth Circuit found that more information would be necessary to make an ultimate determination of whether Entergy Operations could still utilize the FWW for these workers. The case was remanded back to the lower court with instructions to gather more information and make a final ruling. However, if the lower court confirms the guards’ claims, that their salary was intended to compensate them for a fixed set of fluctuating hours, the FWW method of overtime compensation would not apply.
Is FWW Dead for Firefighters in the Fifth Circuit?
It is too early to determine what implications this decision will have for fire departments that utilize FWW in conjunction with fixed fluctuating schedules. Obviously, fire departments that utilize FWW in the Fifth Circuit should be very concerned, however, whether other courts will follow the Fifth Circuit’s lead remains to be seen. Additionally, this case illustrates the importance of having clear and concise compensation policies that are designed to address these types of issues if and when they arise.
We will certainly be following this decision as it develops. This is one of many topics discussed at all our upcoming Fair Labor Standards Act (FLSA) for Fire Departments seminars. Please consider joining us.
Here is a copy of the Fifth Circuit’s decision: