DOL proposes fluctuating workweek change

The DOL on Monday proposed a rule that would loosen overtime pay standards for employees who work irregular workweeks, allowing employers to give bonuses without fear of overtime complaints.

The proposed rule would allow employers to pay employees flat bonuses in addition to a calculated overtime rate. The change would apply to employees on a fixed salary who work fluctuating hours week to week. Under the fluctuating workweek method of pay, such employees are entitled to overtime of half their base-rate pay for every extra hour worked beyond 40 hours.

Under the proposed rule, DOL seeks to clarify that employers may pay flat-rate bonuses to workers under the fluctuating workweek structure. The Trump administration’s concern is that employers may inadvertently run afoul of overtime laws if bonuses are considered to be part of employees’ salaries; regarding bonuses as part of an employee‘s base compensation would also drive up overtime costs. This dynamic disincentivizes employers from giving bonuses, supporters of the change say.

But the Obama administration in 2011 argued that allowing employers to give bonuses to employees on a fluctuating schedule could shift the bulk of pay to a bonus-based structure, allowing employers to bypass overtime requirements.

“The department is no longer concerned that employers would shift large portions of pay into bonus and premium payments and is not aware of any evidence of problematic pay shifting,” DOL said in a Federal Register notice published Monday. “To the contrary, the Bureau of Labor Statistics finds that in situations where employers are permitted to pay bonuses and premiums, such supplemental pay constitutes a relatively small portion of employees’ overall compensation — no more than 5 percent for any occupation.”

“The department now believes the proposal would encourage employers to pay these bonuses, premiums, and additional pay to salaried nonexempt employees who work fluctuating hours, and the department does not believe that employers will shift large portions of salaries into such supplemental payments.“