On May 20, the Department of Labor (DOL) announced its final rule on the fluctuating workweek (FWW) method of calculating overtime pay for nonexempt employees. The final rule, effective 60 days from the date of publication, provides much-needed clarification on this method of compensation that has confounded many employers and resulted in different interpretations by the courts. Significantly, the final rule expressly permits employers to pay bonuses and incentive compensation (premiums for working nights or productivity pay) to employees who are paid using the FWW method. Courts have disagreed as to whether such additional payments destroy the “fixed salary” requirement of the FWW method, exposing employers to additional liability for overtime violations under the Fair Labor Standards Act (FLSA). The final rule addresses the confusion created by the former 2011 final rule that did not adopt certain proposed language related to the payment of bonuses under the FWW method.

As noted by the DOL, the timing of this final rule is not unintentional: “[The final rule] is especially important as workers return to work during the COVID-19 pandemic. Some employers are likely to promote social distancing in the workplace by having their employees adopt variable work schedules, possibly staggering their start and end times for the day.” The department believes that the changes to the regulation will make it easier for employers to be creative in scheduling, but also have the freedom to provide bonuses and incentives to employees (including hazard pay), without repercussion.