Labor & Employment Law

The Continuing Saga Of The Fluctuating Work Week Heads To The Supreme Court

By Mark Tabakman

An employee who was paid a salary, deemed exempt by her employer, filed a lawsuit claiming she was in fact non-exempt and won.  The calculation of her damages, however, was not to her liking as the court computed the overtime using the half-time method allowed by the Fair Labor Standards Act ('FLSA') fluctuating work week (FWW) regulations for salaried non-exempt employees.  The employee has now filed a petition with the United States Supreme Court asking for a determination that this methodology was incorrect.  The case is entitled Urnikis-Negro v. American Family Property Services Incorporated and comes out of the Court of Appeals for the Seventh Circuit.

The employee earned a salary of $52,000 a year and claimed she usually worked in excess of forty hours per week, but was never paid overtime.  The defendant claimed that she was exempt as an administrative employee, but the district court rejected that position.  The court then applied the fluctuating workweek computation method, which had the effect of significantly reducing the damages to approximately $25,000.

The 'fluctuating workweek' regulations govern the payment of overtime to non-exempt salaried employees.  When such employees work different numbers of hours on a weekly basis, the regular hourly wage, on which overtime is then computed, is calculated by dividing the weekly salary by the total number of hours worked, getting a regular rate for that particular week, dividing that by two to get the half time component and multiplying that half-time number by the number of overtime hours.

The employee wanted the calculation done by dividing her weekly salary by forty, getting a fixed hourly rate and then doing a time-and-one-half calculation on that hourly rate.  That second methodology would produce a much higher overtime/damages number.  The Seventh Circuit did agree that the pertinent regulations (29 CFR 778.114) did not apply to her position, but decreed that this method could be used for her damages computation based on an earlier Supreme Court decision.  The petition asserted that leaving the Seventh Circuit decision stand will give employers an undue advantage as they can classify employees as exempt, pay them a salary and if they are wrong, they will not be required to pay time-and-one-half overtime.

I believe the Seventh Circuit is correct here.  If a misclassification occurs, the FWW method should apply to the calculation of damages because there is no regulatory or statutory basis for converting the salary into an hourly rate, which would then generate the "usual" overtime calculation, such as would be paid a non-exempt hourly worker.  Assuming there was no nefarious intent by the employer to 'intentionally' misclassify workers so as to get the 'benefit' of a FWW calculation, the half-time calculation is proper.  My reading of the tea leaves is that the Supreme Court will not accept the case for its decision.

To be continued…
 

Full post as published by Wage & Hour - Development & Highlights on December 13, 2010 (boomark / email).