Fluctuating Workweek May Apply to Those Who Work Overtime

By Jeffrey Rhodes August 19, 2020
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Bed Bath & Beyond store front

Bed Bath & Beyond could use the fluctuating-workweek compensation method to comply with overtime compensation requirements under the Fair Labor Standards Act (FLSA) even though workers almost always worked more than 40 hours in a workweek, the 2nd U.S. Circuit Court of Appeals ruled.

Department managers of Bed Bath & Beyond brought an FLSA collective action against the company, claiming that the organization should not have paid them overtime compensation according to the fluctuating-workweek method. Bed Bath & Beyond used the fluctuating-workweek method until March 2015, when it switched to paying department managers overtime based on 150 percent of a nonfluctuating-workweek hourly rate.

[SHRM members-only toolkit: Complying with U.S. Wage and Hour Laws and Wage Payment Laws]

The fluctuating-workweek method requires that employers pay employees a fixed weekly wage plus overtime compensation based on one-half of a regular rate that varies every week based on the number of hours worked. The FLSA allows such overtime compensation instead of a fixed regular rate if the rate never goes below the minimum wage and the employees agree to this overtime compensation method.

The department managers raised several issues with how Bed Bath & Beyond applied the fluctuating-workweek method during the relevant time period. First, the department managers pointed out several instances in which employees received less than the full fixed weekly wage for weeks in which they worked less than 40 hours.

Second, the department managers argued that Bed Bath & Beyond allowed them to transfer paid holidays from a workweek in which a department manager worked the holiday to a future workweek.

Third, the department managers argued that the fluctuating-workweek method should not apply because they almost always worked over 40 hours in a workweek and seldom, if ever, worked fewer than 40 hours a week.

Bed Bath & Beyond moved for summary judgment on the department managers' claims at the district court, which granted the motion. On appeal, the department managers raised these arguments to overturn the district court's dismissal of their claims.

The 2nd Circuit reviewed the evidence that Bed Bath & Beyond allegedly failed to pay department managers a fixed weekly wage during certain weeks in which they worked fewer than 40 hours. The company produced documents covering more than 1,500 weeks during which the department managers worked prior to March 2015. The documents showed that Bed Bath & Beyond paid less than the fixed weekly wage for hours worked in a week in only six weeks.

Reviewing these six instances in which a fixed weekly wage was not paid for a partial workweek, the 2nd Circuit found that they did not show an attempt to undercut a fixed weekly wage. Three of them involved mistaken underpayments that Bed Bath & Beyond corrected, and two others involved partial workweeks in which one employee resigned before the end of the week and another agreed to take unpaid leave for one day to extend a vacation. The sixth instance involved an employee absent for a day while out on Family and Medical Leave Act time off.

The 2nd Circuit considered the argument that Bed Bath & Beyond violated the fluctuating-workweek method by allowing employees to transfer paid holidays to future dates when they worked the holidays. The court found that nothing in the fluctuating-workweek calculation method precluded this benefit, as it did not constitute a shift differential or other increase to the employee's fixed weekly wage based on hours worked.

Finally, the 2nd Circuit considered the department managers' argument that they almost always worked more than 40 hours a week and seldom, if ever, worked less. The fluctuating-workweek method almost always resulted in reducing their regular rates below a nonfluctuating-workweek hourly rate and almost never increased their regular rates above a nonfluctuating-workweek hourly rate, thus only benefiting Bed Bath & Beyond by decreasing their overtime compensation.

The 2nd Circuit considered decisions from other jurisdictions that supported this argument. Nevertheless, it found these opinions distinguishable and noted that the U.S. Department of Labor recently amended the fluctuating-workweek regulation to confirm that the method does not require that an employee's hours fluctuate above and below 40 from week to week.

The 2nd Circuit thus upheld the dismissal of the department managers' FLSA claims.

Thomas v. Bed Bath & Beyond Inc., 2nd Cir., No. 19-1647-cv (June 15, 2020).

Professional Pointer: The fluctuating-workweek calculation method has many requirements and limitations. If used correctly, this method can reduce an employer's overtime payroll costs.

Jeffrey Rhodes is an attorney with McInroy, Rigby & Rhodes LLP in Arlington, Va.

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