Q. My work hours fluctuate a lot depending upon the flow of work. To help manage its cash flow, my employer asked me to sign an agreement where I would receive a set salary each workweek regardless of the number of hours I work. In weeks where I work more than 40 hours, I am paid half-time for overtime hours, instead of time and a half. Can my employer do this? My position is nonexempt.
A. The Fair Labor Standards Act regulations permit employers to paya fixed salary for a fluctuating workweek and to compensate them for their overtime hours on a half-time basis. Under this method of compensation, an employee is paid a fixed salary covering whatever number of hours the job demands in a given week. With straight time already compensated in the salary, only one-half of the regular hourly rate must be paid for overtime.
An employer may use the half-time method of calculating overtime only if all three of the following conditions are met:
- The employee understands that his salary is meant to cover all hours worked.
- The parties have a clear understanding that the salary will not fluctuate even though the job demands that the employee work more or less than 40 hours in a given week.
- The salary is large enough to ensure the average hourly wage never falls below the federal minimum wage.