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Fluctuating workweek hours and additional overtime pay under the FLSA

The 5th Circuit recently clarified the circumstances under which the fluctuating workweek (“FWW”) applies to overtime cases. The FWW method is one way of calculating overtime compensation that satisfies the requirements of the Fair Labor Standards Act (“FLSA”). See 29 C.F.R. § 778.114(a). The issue of whether it is applicable to a case is important because it determines whether a claimant is entitled to half-time or one-and-a-half times their regular rate of pay. The FLSA generally requires that employees be paid an overtime premium of one and one-half times the “regular rate of pay” for all hours worked in excess of the 40-hour workweek. 29 U.S.C. § 207(a)(1). Although an employer may satisfy this requirement by using the FWW method, courts require four prerequisites for its use:

  1. the employee’s hours must fluctuate from week to week;
  2. the employee must receive a fixed salary that does not vary with the number of hours worked during the week (excluding overtime premiums);
  3. the fixed amount must provide compensation every week at a regular rate at least equal to the minimum wage; and
  4. the employer and employee must share a clear mutual understanding that the employer will pay the fixed salary regardless of the number of hours worked. Brantley v. Inspectorate Am. Corp., 821 F.Supp.2d 879, 888 (S.D. Tex. 2011) (citing 29 C.F.R. § 778.114(a), (c).

Saybolt, a petroleum products company, used the FWW to calculate overtime compensation for its oil and gas inspectors, all who worked fluctuating hours each week. Dacar v. Saybolt, LP, 907 F. 3d 215 (5th Cir. 2018). Saybolt also offered incentive payments for inspectors who were willing to work less desirable hours like holidays and weekends. Id. A group of inspectors (“Plaintiffs”) sued Saybolt, alleging that the incentive payments precluded use of the FWW method and placed their employer in violation of the FLSA. The district could held that Saybolt’s payment scheme had violated the FLSA. Id.

Saybolt used two different methods to pay overtime:

  1. FLSA’s standard time and one-half method in which the inspectors earned one and one-half times their regular rate for every hour worked over 40; and
  2. (2) the FWW method where Federal regulations state that this method is appropriate when an employee works hours that fluctuate from week to week and the employee agrees that a fixed weekly salary will constitute straight-time pay (i.e., non-overtime pay) for all the hours worked in a week. The FWW inspectors received the same weekly base salary, regardless of whether they worked 60 hours a week or only 20 hours.

Calculation of overtime premiums under the FWW method is different from the standard FLSA method in a couple of ways. First, the “regular rate” under the FWW method is determined by dividing the weekly base salary by the total number of hours an employee actually works during the week. This “regular rate” equals the weekly salary divided by “the number of hours which the salary is intended to compensate.” 29 C.F.R. § 778.113(a). Because the hours worked fluctuate each week, the regular rate under FWW will also fluctuate. For example, if, in a given week, there is a $600 weekly base salary and 40 hours are worked, the FWW method would yield a regular rate of $15.00 per hour ($600 divided by 40). However, a 60 hour workweek would yield a regular rate of $10.00 per hour ($600 divided by 60). Second, the overtime rate under the FWW is one-half, instead of one and one-half times the regular rate. For example, in a 60 hour workweek, an employee would receive an overtime rate of $5.00 per hour (one half times the $10 regular rate, as explained above).

The Saybolt FWW inspectors were supposedly paid overtime and were also given incentive payments. So, when a FWW inspector had a $600 base salary for 60 hours worked, they also earned $150 in incentive payments, which was added to the base salary ($600 plus incentive payment of $150 = $750 divided by 60). The regular rate would then come out to $12.50. The overtime rate would be $6.25 per hour (one half times the $12.50 regular rate), which resulted in an overtime premium of $125 (20 overtime hours worked times the $6.25 overtime rate). However, non-FWW inspectors were not eligible to receive these incentive payments.

Here, the Fifth Circuit found that the record was clear that the plaintiffs’ hours varied from week to week and that they received the same base salary (plus incentives) regardless of whether they worked 60 or 20 hours. What this case ultimately demonstrates is that the FWW method at Saybolt required a fixed weekly salary that does not vary by the number of hours worked. The Court found Saybolt’s incentive payments to be “incompatible with the fluctuating workweek method” and held that such payments would not “be appropriate to expand the use of this method of computing overtime pay beyond the scope of the current regulation.” See Saybolt, 907 F. 3d at 223; see also Updating Regulations Issued Under the Fair Labor Standards Act, 76 Fed. Reg. 18832, 18848-50 (April 5, 2011). The court of appeals for the Fifth Circuit agreed with the district court, finding that the plaintiffs were entitled to an award of one and one-half times the regular rate instead of using the one-half multiples that Saybolt claimed, as Saybolt failed to comply with the FWW method and its use of the method to calculate the FWW inspectors’ overtime premiums was illegal.

Are you an oilfield worker who has questions regarding whether you are entitled to additional overtime pay? If so, consider speaking with an experienced overtime attorney. Josh Borsellino is an overtime attorney licensed in Texas that represents workers who have been paid unfairly because of their fluctuating hours. Josh fights for the rights of workers that have been denied overtime pay. Josh accepts overtime cases on a contingency basis, meaning that he only gets paid if money is recovered from the company being sued. Josh provides free consultations for anyone with questions about overtime pay. He may be reached at 817.908.9861 or 432.242.7118.