If you are a part of the workforce here in Texas, chances are you are paid by one of three methods. You may receive a salary as an exempt employee, or you may be non-exempt and paid either hourly or by a weekly salary. Employees who are exempt are not paid overtime; only employees in certain industries, with specific job roles, can be legally exempt.
Non-exempt employees must receive overtime at time-and-one-half the hourly rate. For hourly employees, this is straightforward. For those paid on a weekly salary due to a fluctuating workweek, the overtime rate is calculated by dividing the weekly salary by the hours worked in a given week, and then multiplying that by 1.5. Unfortunately, under this latter method, the more hours a person works, the lower his or her pay. This fluctuating workweek method has recently come under fire in some courtrooms.
In order to better understand the fluctuating workweek model, here is an example. If an hourly employee earns $400 a week, this employee is making $10 an hour. Therefore, overtime hours–those worked on top of 40–will be paid out at $15 per hour. If a fluctuating workweek employee makes $400 a week, his or her hourly rate varies. If he or she puts in 50 hours this week, the hourly rate is $8 and overtime is $12.
Under the Fair Labor Standards Act, there are a number of legal standards that must be met in order to pay employees based on a fluctuating workweek. Among other standards, the salary must be large enough so the hourly rate never falls below minimum wage and the employee must be well-aware of the salary’s terms.
The fluctuating workweek option was designed for employees with irregular schedules, but many employers make mistakes when using this. In fact, both Frito-Lay and Kraft Global Foods, Inc. have recently been sued for wrongly using this method.
There are several red flags that suggest a worker is not being fairly compensated. Any fluctuating workweek employee who works so many hours that the hourly rate is below minimum wage; receives commission or bonuses; or is not paid at least the full salary every week, may benefit from talking to a lawyer.
Source: Pittsburgh Post-Gazette, “Rulings go against employers using ‘fluctuating’ workweeks to cut overtime costs,” Ann Belser, Oct. 8, 2012