United States Employment Law

Under the Fair Labor Standards Act (‘FLSA’), hours of work must be calculated on a workweek basis. An employee’s workweek is a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods. The workweek does not need to coincide with the calendar week. It may begin on any day and at any hour of the day. Different workweeks may be established for different employees or groups of employees. Averaging of hours over two or more workweeks is generally not permitted.

Federal law permits minors 14 and 15 years of age to work the following hours:

• • 3 Hours (school day)
  • 8 Hours (non-school day)
  • 18 Hours (school week)
  • 40 Hours (non-school week)
  • None during normal school hours
  • None before 7 a.m
  • None after 7 p.m.

Under the Fair Labor Standards Act (‘FLSA’), hours of work must be calculated on a workweek basis. 

The FLSA requires non-exempt employees must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest unless overtime is worked on such days. Employers do not have to count paid holidays, paid time off (PTO), vacation, personal and sick leave hours taken by an employee toward the calculation of the overtime requirement, because these hours are not actually “worked” and are therefore not considered as hours counted toward overtime under the FLSA.

Overtime pay is calculated using an employee’s regular rate of pay, which is defined as all remuneration for employment paid to, or on behalf of, the employee. In general, an employee’s regular rate of pay is computed by dividing the employee’s total remuneration for hours worked in the workweek by the number of hours worked during the workweek. The regular rate of pay excludes gifts, payment for vacations, holidays, illnesses, travel expense reimbursements made by the employer, and similar payments not made as compensation for hours of work.

On March 7, 2019, the Department of Labor announced a proposed rule that would update the Salary Level Test, making more than a million more American workers eligible for overtime. This would raise the salary requirement that determines whether an employee is exempt from getting paid overtime. In order for an employer to avoid paying an employer an overtime premium for hours worked over 40 in a workweek, it must show that the employee meets a duty and salary test.

After an attempt in 2016 during the Obama administration to raise the level to $47,476 per year was delayed by a federal judge for the U.S. District Court for the Eastern District of Texas (and then denied by the current administration), the current DOL is scheduled to propose a new threshold in March 2019. US Labor Department Secretary R. Alexander Acosta suggested during his confirmation hearing that the maximum for mandatory overtime pay should be increased to around $33,000.

What might the new salary threshold be if the proposed Overtime Rule gets enacted?

• • • Either the revised salary threshold would be $31,824 annualized or $612 per week; or
    • If instead, the DOL were to increase the threshold by the level of inflation, the new salary level would be $30,576 annualized or $588 per week.

What to expect after enactment of the Overtime Rule?

The new overtime rule would result in the reclassification by employers of more than a million currently exempt workers as non-exempt and an increase in pay for others. Companies then might set an hourly rate for those employees that would result in the same number of hours worked and the same total pay, even with overtime hours.

Amendment to Regulation on Fluctuating Workweek Method of Calculating Overtime

The Department of Labor (the Department) is revising its regulation under the Fair Labor Standards Act (FLSA or the Act) for computing overtime compensation of salaried non-exempt employees who work hours that vary each week (fluctuating workweek). On May 20, 2020, the U.S. Department of Labor announced a final rule, which among other requirements allows employers to pay bonuses or other incentive-based pay to salaried, non-exempt employees whose hours vary from week to week. The final rule is effective from August 7, 2020.

The Changes to Fluctuating Workweek Overtime Calculations

On November 5, 2019, the Department issued a Notice of Proposed Rulemaking (NPRM) proposing to revise its existing regulation at § 778.114(a) to clarify that any bonuses, premium payments, or other additional pay of any kind must be included in the fluctuating workweek method of calculating compensation of the regular rate unless they are excludable as per statutory law. The Department also proposed simplifying revisions § 778.114 by listing each required circumstance for the fluctuating workweek method to correctly compute overtime pay and removing duplicative text from revised § 778.114(c). 

Finally, the Department proposed to change the title of the regulation from “Fixed salary for fluctuating hours” to “Fluctuating Workweek Method of Computing Overtime” to better reflect the purpose of the subsection and to improve the ability of employers to locate the applicable rules.

Circumstances Where an Employer May Use the Fluctuating Workweek Method To Compute Overtime Pay

There are five circumstances that enable an employer to use the fluctuating workweek method to properly compute the regular rate and overtime pay owed under the FLSA. Each of these circumstances is discussed below.

• • The employee’s hours must fluctuate from week to week.
  • The employee must be paid a fixed salary that does not vary with the number of hours worked (though the new rule states that employers using the fluctuating workweek method may take occasional disciplinary deductions from an employee’s salary for willful absences or tardiness or for infractions of major work rules);
  • The fixed salary must satisfy the minimum wage;
  • The employer and employee must have a clear mutual understanding that the fixed salary is compensation (apart from overtime premiums) for whatever hours the employee works each week. The NPRM clarifies that employers may pay bonuses, premium payments, and other additional pay of any kind in addition to the fixed salary; and
  • The employee receives overtime compensation, in addition to such fixed salary and any bonuses, premium payments, commissions, hazard pay, and additional pay of any kind, for all overtime hours worked at a rate of not less than one-half the employee’s regular rate of pay for that workweek. Since the salary is fixed, the regular rate of the employee will vary from week to week and is determined by dividing the amount of the salary and any non-excludable additional pay received each workweek by the number of hours worked in the workweek.