5 Ways Your Employer Might be Violating the Fluctuating Work Week or "Chinese Overtime" Law
Some employers use the fluctuating work week method to pay employees. This is also known as the "variable workweek" or "half-time" method. Some courts even refer to it as "Chinese overtime." The sad effect of this law is that you end up making less per hour the more you work. The bad news is that this is a legal way to pay employees under the Fair Labor Standards Act (FLSA).
Standard Overtime Rate Compared to Chinese Overtime: Why This Hurts You
The standard way of calculating overtime pay is well known. You take your regular hourly rate and multiply it by 1.5. An hourly rate of $10 becomes an overtime rate of $15, regardless if you work 1 hour of overtime or 30 hours of overtime. It's clean, simple and fair.
Under the fluctuating work week method, an employee is paid a fixed salary no matter how many hours are worked. When the employee works more than 40 hours in a week, the fixed salary is divided by the total number of hours worked. So, an employee who is paid a fixed salary of $400/week and works 40 hours receives $10 per hour. However, when that same employee works 50 hours/week, he ends up receiving $8/hour ($400/50). The overtime rate is now 1.5 x $8 instead of 1.5 x $10. If he works 60 hours, his overtime rate is 1.5 x $6.66 ($400/60 = $6.66). That's completely unfair, yet it is legal.
Now for the good news: finding your company's mistake is fairly easy
Most employers make mistakes when using the fluctuating work week and, as a result, end up owing back wages to their employees. One slip up can invalidate the entire pay structure for all other weeks worked.
Employers must meet certain requirements in order to use this pay method:
- There must be a clear, mutual understanding that the employee's fixed salary will cover all hours worked in a workweek, even if a small number of hours are worked.
- The employee must be paid a fixed weekly salary considered straight-time compensation for all hours worked in a workweek if the employee performs any work in the workweek.
- The employee's hours must fluctuate from workweek to workweek.
- The regular hourly pay rate used to base the half-time overtime rate must not fall below federal minimum wage regulations.
Here's how we help our clients break the fluctuating work week and obtain their back pay:
Violation 1: We identify weeks where the employee worked less than 40 hours and was not paid the salary.
Violation 2: We identify bonuses, shift pay, holiday pay, commissions or some other additional compensation that means the employee is not receiving a "fixed salary."
Violation 3: We find that there was a complete lack of communication between the employer and employee regarding the use of the fluctuating work week. A signed document might not be enough, but no signed document is a good sign a violation has taken place.
Violation 4: We find weeks where the employee worked so many hours that the rate falls below minimum wage. In my example above the $6.66 rate is below the $7.25 federal minimum wage.
Violation 5: We find that the work schedule in fact does not fluctuate from week to week. An hour variance here and there is not enough.
If we find a violation even in a few select pay cycles, you might be owed your entire back wages, not to mention double damages and attorney's fees.
Whether you work in Texas, Illinois, California, New York or some other state, if you are compensated under the fluctuating work week method, send us your pay stubs with an explanation of how you are paid. We'll let you know if there is a violation and whether you have a claim.
Our firm frequently finds that many employees paid with the fluctuating workweek method are victim to wage scams and it is a good idea to consult an employment attorney if you believe you have not been paid according to the FLSA and labor laws.