Fifth Circuit Applies Fluctuating Work Week In FLSA Misclassification Case

If an employee or group of employees have been found to have been misclassified as exempt, are they entitled to time-and-a-half for overtime hours, or only the half-time premium? Years ago, the Supreme Court seemed to indicate that in such a case, the employer could rely upon a fluctuating work week (often called FWW) calculation and be liable only for the half time premium (actually a little less than that, as explained below). Overnight Motor Transp. Co. v. Missel, 316 U.S. 572 (1942). Three years ago, in Urnikis-Negro v. Am. Family Prop. Servs., 616 F.3d 665 (7th Cir. 2010), the Seventh Circuit applied Missel in an overtime case to hold that the FWW calculation, rather than time-and-a-half, was the correct method to determine damages in misclassification cases. We blogged that case on August 10, 2010.

The decision as to which method to use is more than academic. If a misclassified employee has worked 50 hours per week, they may be entitled to time and a half for 10 hours of work per week, with the hourly rate determined by the weekly salary divided by 40 hours. But under the FWW method, they will be entitled to less than a third of that. Under that method, the salary would be divided by the full 50 hours, and the employer would only be responsible for the half time premium based on that lower rate. Let's assume a weekly salary of $1,000. At full overtime, the rate would be $25 ($1,000/40 hours), and the unpaid overtime would be $375 per week ($25 x 10 x 1.5). Under the FWW method, the rate would be only $20 ($1,000/50 hours) and the unpaid overtime would be only $100 ($20 x10 hours x 0.5). Multiply that times 50 weeks in a year, and the difference is $14,000 per employee.

A recent case from the Fifth Circuit...