The Labor Department sent a proposal to [the Office of Management and Budget at the White House last Thursday] that would alter how employers calculate overtime for salaried employees with fluctuating workweeks. The proposal would “grant employers greater flexibility to provide additional forms of compensation to employees,” according to the most recent regulatory agenda.
’Under the Fair Labor Standards Act, overtime-eligible workers must be paid time and a half if they work more than 40 hours a week. But if a worker’s hours vary each week, his or her employer may use an alternative method to calculate the overtime due. “Under this method, employees who are entitled to overtime pay receive a fixed weekly salary, which is divided by the actual number of hours an employee worked in the week to determine the week’s base hourly rate,” Lisa Nagele-Piazza, explained for SHRM. “The employees will then receive an additional 0.5 times their base rate for each hour worked beyond 40 in the workweek.”
The Obama DOL was not a fan of this method and did not want to expand it. It issued a 2011 rule precluding employers who compensated their workers with bonus payments from using the method because it could allow employers “to pay a greatly reduced fixed salary and shift a large portion of employees’ compensation into bonus and premium payments,” potentially creating disparities. More from SHRM.
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