Tag Archives: Fixed Salary

M.D.La.: Defendant Not Entitled to FWW in Salary Misclassification Case, Where Failed to Pay Plaintiff “Fixed Salary” as Required by 778.114

McCumber v. Eye Care Center of America, Inc.

This case was before the court on the parties cross-motions seeking summary judgment.  As discussed here, the court held that Plaintiff’s unpaid overtime damages, if any, were to be calculated using the FLSA’s default time and a half methodology, rather than the fluctuating workweek (“FWW”) methodology.  Although the Defendant claimed it was entitled to use the FWW to calculate Plaintiff’s damages, due to the fact that Plaintiff was salaried misclassified, the court disagreed.  The court held that Defendant had failed to pay Plaintiff a “fixed salary” as required for application of 29 C.F.R. § 778.114, because  the evidence showed that Defendant docked Plaintiff’s pay on at least 2 occasions when Plaintiff worked fewer than 40 hours in a workweek.

Reviewing the parties’ respective arguments and holding that any damages ultimately found due were to be calculated at time and a half, the court reasoned:

“Defendants’ motion for partial summary judgment seeks judgment in its favor declaring that any wages found to be due plaintiff in this case shall be calculated using the fluctuating workweek method (“FWW method”) pursuant to 29 C.F.R. § 778.114.  Subsection (a) of the provision at issue instructs that

‘[a]n employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many.’

Under the FWW method, the amount of overtime owed to such an employee is paid at the rate of one-half-time pay, rather than one-and-a-half-time pay. The reason for this is that, according to the salary agreement among the parties, all the hours worked by the employee have already been compensated at straight-time pay and, thus, these hours are only shortchanged by half-time pay, rather than completely uncompensated.

In order to calculate the amount actually due under the FWW method, the fixed weekly salary is divided by the number of hours actually worked in a particular week. The resulting sum is the employee’s “regular rate of pay.” An employee found to be due overtime pay would be paid one half of the regular rate of pay for each hour of overtime worked in that particular week. While the regular rate of pay decreases as hours worked each week increase, the fixed salary must be sufficient such that the regular rate of pay never falls below the minimum wage requirement of 29 U.S.C. § 206(a)(1).

In addition to the requirement that the minimum wage requirement be sustained by the regular rate of pay calculation, the employer who has allegedly misclassified a position as exempt under the FLSA bears the burden of proving that there existed a “clear mutual understanding” among the employer and employee that the fixed weekly salary is compensation for the hours worked in any given workweek, no matter how few or many, in order to impose the FWW method for calculating overtime due.

Defendants argue that “it is undisputed that [p]laintiff was classified as exempt under the FLSA and was paid a fixed salary of $40,000 per year, regardless of the hours he worked.”  Defendants point to plaintiff’s testimony that he was “usually paid a set amount in each paycheck” and “often worked before and more often after the time set on the schedule” as evidence that plaintiff and defendants were parties to a “clear mutual understanding” that his salary was fixed, despite his varying hours .

The court has examined plaintiff’s written statement, as cited by defendants, and finds that the citation offered by defendants quotes only a portion of plaintiff’s statement. In its entirety, the passages cited by defendants reads

22. I was usually paid a set amount in each paycheck, plus production and other bonuses.

23. The weekly schedule made by the store manager was the minimum time I was expected to work. I often worked before and more often after the time set on the schedule when there were orders to fill or equipment to maintain or repair, or when I had to drive to one of the other labs in the district to repair or maintain equipment. I was also frequently called in to repair machinery on my days off.

Plaintiff asserts that he was not party to a “clear mutual understanding” as is required for application of the FWW method. Plaintiff points out that, on at least two occasions, his biweekly paycheck was reduced by 8 hours so that he was paid for only 72 hours, though he is usually paid for 80 hours.  Plaintiff argues that, pursuant to 29 C.F.R. 778.114(c), the FWW method is inapplicable in the instant case because subsection (c) clearly instructs that the employer must pay the salary agreed to by the parties even when the employee does not work the full number of hours scheduled.

Plaintiff further asserts that ECCA internal policies instruct general managers to assume a 40 hour workweek when scheduling various management personnel to work in their stores.  Plaintiff also points to the ECCA policy entitled “Work Schedules and Attendance,” which states that “[t]he normal workweek will consist of forty hours. The normal workday will consist of eight hours of work with an unpaid meal period.”  Plaintiff argues that these policies, as well as the documented deductions in his biweekly paychecks demonstrate that defendants expected plaintiff to work a minimum of 40 hours and, in the event he failed to do so and did not claim leave or other holiday to make up for the time, defendants expected not to pay him the full amount of his salary.

The court has reviewed the documentary evidence cited by plaintiff, as well as plaintiff’s statement, cited by defendants and finds that defendants have failed to demonstrate that no genuine dispute exists as to the applicability of the FWW method in this case. In light of the documentary evidence produced by plaintiff, the court finds that plaintiff has demonstrated that, pursuant to 29 C.F.R. 778.114(c), the FWW method is inapplicable to the case at bar. More specifically, the court finds that the check summary documents offered by plaintiff demonstrate that, on two occasions (9/25/2009 and 10/9/2009), plaintiff failed to work the required 80 hours in a designated two-week period and did not claim any holiday or vacation to make up for the shortage in his hours and, accordingly, eight hours worth of pay was deducted from his salary.  Thus, no sincere argument may be made by defendants that its intention was to pay plaintiff a set salary regardless of the hours he worked in a given week, as required for application of the FWW method. On the contrary, the evidence before the court demonstrates defendants’ expectation that plaintiff work a minimum of forty hours each week and that he would be compensated only for those hours he worked or for which he claimed holidays or vacation to which he was entitled. Defendants’ motion will be denied as to its request for application of the FWW method in this case and, accordingly, any overtime found by the jury to be owed to plaintiff shall be compensated at the rate of one and one-half times the amount of plaintiff’s regular hourly wage pursuant to 29 C.F.R. 541.207(a)(1).”

Click McCumber v. Eye Care Center of America, Inc. to read the entire Memorandum Ruling.

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Filed under Damages, Fluctuating Workweek, Salary Basis

D.N.J.: Defendants’ Purported Use Of Fluctuating Workweek (FWW) Violated FLSA, Because They Did Not Pay Plaintiffs A “Fixed Amount As Straight Time Pay”

Adeva v. Intertek USA, Inc.

This case was before the Court on the parties respective Motions for Summary Judgment on a variety of issues.  Significantly, the Defendants purported to pay Plaintiffs under a Fluctuating Workweek methodology, pursuant to 29 C.F.R. §778.114.  Granting Plaintiffs’ Motion for Summary Judgment, the Court rejected this claim, holding that since Defendants failed to pay Plaintiffs a “fixed amount as straight time pay” each week, the pay methodology at issue violated the FLSA.

In framing the issue, the Court stated, “[t]he essential question is whether Defendants paid Plaintiffs on a proper Fluctuating Workweek (‘FWW’) method pursuant to 29 C.F.R. § 778.114(a). Defendants pay Plaintiffs a percentage of their annual salary, and, if eligible, ‘day off pay,’ ‘off shore pay,’ and ‘holiday pay.’ Plaintiff alleges that because of such special payments, Defendants cannot demonstrate that the amount paid each week was “fixed.” A “fixed amount as straight time pay” is necessary to apply the FWW under the Fair Labor Standards Act. 29 C.F.R. § 778.114(a).”

Reasoning that the pay method at issue did not comply with the FLSA, the Court discussed the general principles of the FLSA and the specific pre-requisites for application of the FWW.

“29 U.S.C. § 207(a) of the Fair Labor Standards Act (“FLSA”) requires the payment of overtime compensation “at a rate not less than one and one-half times the regular rate.” The fluctuating workweek method (“FWW”) provides an alternative for calculating overtime premiums when certain conditions are met. In short, to apply the FWW method, Defendants must demonstrate that:

1) Plaintiffs’ hours fluctuate from week to week, 2) Plaintiffs receive a fixed salary that does not vary with the number of hours worked during each workweek (excluding overtime premiums), 3) the fixed amount received by Plaintiffs provides compensation every week at a regular rate that is at least equal to the minimum wage, and 4) that Defendants and Plaintiffs share a ‘clear mutual understanding’ that Defendants will pay that fixed salary regardless of the number of hours worked. 29 C.F.R. § 778.114(a); O’Brien v. Town of Agawam, 350 F.3d 279, 288 (1st Cir.2003); Flood v. New Hanover, 125 F.3d 249, 252 (4th Cir.1997).

The essential question before the Court is whether Defendants have met the prerequisites for applying the FWW method. The Court is not convinced that Defendants pay Plaintiffs “a fixed salary that does not vary with the number of hours worked during each workweek (excluding overtime premiums).” 29 C.F.R. § 778.114(a). The record demonstrates that Plaintiffs’ compensation for non-overtime hours varied, depending upon earned offshore pay, holiday pay or day-off pay. The Court is convinced that due to such payments, Plaintiffs cannot receive the fixed salary required to apply the FWW. See, e.g., O’Brien, 350 F.3d at 288 (holding that a ten-dollar night-shift increase precluded application of the FWW); Ayers v. SGS Control Services, Inc., 2007 WL 646326 (S.D.N.Y.2007) (holding “any Plaintiff who received sea pay or day-off pay did not have fixed weekly straight time pay, in violation of 29 C.F.R. § 778.114(a).”); Dooley v. Liberty Mutual Insurance Company, 369 F.Supp.2d 81, 86 (D.Mass.2005) (holding that payment of a premium rate for weekend work precludes application of the FWW).

Most recently, the Southern District of New York was faced with the identical issue currently before this Court. Ayers, 2007 WL 646326. In granting summary judgment in favor of plaintiffs, that Court held that because plaintiffs received sea-pay and day-off pay, their salaries were not fixed, consequently precluding usage of the FWW method of payment. Id. at 8-9. In rendering its decision, the Ayers court relied on the O’Brien and Dooley decisions. In O’Brien, the First Circuit noted that the plain text of § 778.114 requires payment of a “fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many.”   O’Brien, 350 F.3d at 288. Guided by the statutory language, the Court held that workers who received additional compensation (in the form of a $10 shift differential payment) could not have received a fixed amount as required under § 778.114. Id. at 289;see also Dooley, 369 F.Supp.2d 81, 86 (holding that payment of a premium rate for weekend work precludes application of the FWW). The sea-pay, day-off pay, night-shift pay and weekend-pay analyzed in the Ayers, O’Brien and Dooley decisions are nearly identical to the types of payments received by Plaintiffs in this case. Clearly, the payment of differentials such as sea-pay differential or increased pay for working a “night-shift,” means that employees are not being paid a “fixed” salary regardless of hours worked. Instead, the salary fluctuates, based upon whether the employee is or is not receiving “sea-pay” or “night-shift pay.” If the regulation merely required that employees received a minimum salary every week, which could be increased by such bonuses, then Defendants’ argument would have substantial force. The regulation, however, contains no such thing. Consequently, the Court holds that Defendants are precluded from using the FWW method of payment as such premiums and bonuses run afoul of the “fixed salary” requirement of 29 C.F.R. § 778.114(a). Plaintiffs’ motion for summary judgment is granted, in part, as Defendants’ FWW compensation methodology violates the FLSA.”

Although not discussed here, the Court granted Defendants’ Cross Motion, in part, holding that Defendants’ FLSA violation(s) were not willful.  To read more about the case click here.

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Filed under Fluctuating Workweek