Fluctuating-Workweek Follies: First Principles Are Unchanged

The U.S. Labor Department's unfounded April fluctuating-workweek commentary (earlier post here) continues to complicate many pre-existing pay plans and to cause employers to narrow their views of the available compensation alternatives. This is the foreseeable (and apparently intended) result of what DOL said. Unfortunately, some observers are compounding the impact of DOL's commentary by suggesting that its ramifications are more dire than ought to be the case.

We have previously noted that the federal Fair Labor Standards Act grants no regulatory authority to DOL to make such pronouncements. Probably for this reason, the commentary purported to draw substance from sprinkled-in references to the seminal U.S. Supreme Court case of Overnight Transportation Co. v. Missel, 316 U.S. 572 (1942), which embraced the concept underlying the fluctuating-workweek calculation. But DOL's effort is an illusion.

For example, Missel does not support DOL's assertion that paying bonuses, incentive payments, or other additional amounts is "incompatible" with figuring overtime on a fluctuating-workweek basis. The Court did not address this proposition at all; it simply proceeded from the facts as they were presented (which involved a weekly wage for whatever hours the employee worked) and explained how FLSA overtime was to be computed on those facts. The Court did not say, or so much as even imply, that the fluctuating-workweek calculation was inappropriate where other forms of pay are in the picture.

DOL also opined that fluctuating-workweek overtime might create an incentive to work employees long hours because it "results in a regular rate that diminishes as the workweek increases . . .." On this premise, DOL found it inappropriate "to expand the use of this method of computing overtime pay beyond the scope of the current regulation." Of course, the FLSA does not prescribe and in fact does not even address any maximum number of hours employees can be required to work. Moreover, DOL is not authorized to decide whether to "expand" or contract the use of the fluctuating-workweek method for computing overtime. The Supreme Court's reading of the FLSA trumps DOL's musings in this area, and DOL must have overlooked this statement in Missel:

It is true that the longer the hours, the less the rate and the pay per hour. This is not an argument, however, against this method of determining the regular rate of employment for the workweek in question.

316 U.S. at 580.

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