Federal DOL Issues Proposed Rule Allowing Inclusion of Bonus Pay in Overtime Calculation for Fluctuating Workweek Half-Time Overtime Employees

11.12.2019

The fluctuating workweek half-time overtime option has been available for many years under federal law as a way for employers to reduce their overtime costs for employees who work different hours each week. The option requires that the employee be paid a fixed minimum amount weekly regardless of the number of hours worked. Then, if that number of worked exceeds 40, the employer may pay overtime on a half-time of the regular rate of pay basis (determined each week overtime is worked). An example that has been used: an employee paid $500 minimum every week who then works 45 hours in a week, would be paid $527.78 for the week ($500 plus 5 hours at half the regular rate of $500/45-$11.11).

Previously, if the employer wanted to pay any bonus to a fluctuating workweek employee, the half-time overtime option would be lost, and the employer would owe the employee time-and-a-half overtime. The new federal DOL proposal would eliminate that result and allow the payment of bonuses to fluctuating workweek half-time overtime employees as long as the bonus is counted in determining the regular rate. Therefore, if in the example above, the employer decided to award the employee a $100 bonus in that week, the employee would receive $633.35 ($500 plus 5 hours at half the regular rate of $600/45-$13.33).

The new proposed rule was set to be published in the Federal Register on November 5, 2019 and there is now a 30-day public comment period ending on December 5, 2019. Anyone seeking help in submitting a comment to the federal DOL or implementing a fluctuating workweek half-tine overtime program, please contact us at 258-2882 or pkeneally@underbergkessler.com.