Tag Archives: FWW

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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W.D.Va.: “Assistant Manager” At Auto Parts Store Not Administrative Exempt; Damages To Be Calculated At Time And A Half Not Half-time

Brown v. Nipper Auto Parts and Supplies, Inc.

The case was before the Court on cross motions for summary judgment pertaining to whether Plaintiff was exempt from the FLSA’s overtime provisions under the FLSA. Additionally, Plaintiff moved for summary judgment on the issues of willfulness (3 year statute, as well as liquidated damages), and for a finding that the method under which his overtime should be calculated was the default time and a half method. As discussed below, the Court found Plaintiff nonexempt and further held that his damages were due to be calculated based on time and a half and not the fluctuating workweek’s half-time formula.

Addressing the exemption issue first, the Court noted, “Brown’s primary duties were sales and other non-exempt work, not running or servicing; the business. Nipper Auto attempts to characterize Brown’s duties as procurement and quality control, exempt activities; but since his activities generally concerned ordering auto parts based on customers’ requests, these duties are more aptly described as sales, a non-exempt activity. Roger Nipper has indicated no significant managerial decisions or changes that he has made during Brown’s tenure at Nipper Auto in which Brown had input. Indeed, Nipper Auto’s music section, where Brown is purported to have had primary authority, existed before Brown’s hiring and has continued to exist after his termination. Finally, Brown’s intermittent supervision of Shultz fails to show that his primary duty was an exempt activity.” Therefore, the Court found Brown nonexempt.

Later in the decision, the Court addressed the issue of calculating Plaintiff’s damages: “Nipper Auto argues that if Brown is entitled to overtime compensation, it should be calculated using the fluctuating workweek method of payment (the “FWW”), under which an employee’s overtime pay rate is half his regular pay rate. Brown argues that the FWW should not apply and that his overtime compensation rate should be one and one-half times his regular rate. The court agrees with Brown.

Generally, the rate for overtime compensation is one and one-half times the regular rate of pay, 29 U.S.C. § 207(a)(1), but when the FWW method applies, the rate for overtime compensation is one-half the regular pay. 29 C.F.R. § 778.114(a) (2003); Knight v. Morris, 693 F.Supp. 439, 445 (W.D.Va.1988). The FWW method is not an exception to the normal method of computing overtime compensation under the FLSA, “[i]t merely provides an alternative means by which an employer can determine its employees’ regular and overtime rate of pay.” Flood v. New Hanover County, 125 F.3d 249, 252 (4th Cir.1997). The employer must satisfy five conditions in order to take advantage of the FWW calculation: (1) the employee’s hours must fluctuate from week to week, (2) the employee must receive a fixed salary, (3) the salary must meet the minimum wage standards, (4) the employee and the employer must have a clear mutual understanding that the salary (not including overtime premiums) is fixed regardless of the number of hours the employee works, and (5) the employee must receive overtime compensation for hours worked in excess of forty hours, not less than the one-half rate of pay. Id.; 29 C.F.R. § 778.114(a). Though the first three FWW requirements are established, the court finds that the FWW method does not apply because Nipper Auto cannot fulfill the fourth and fifth requirements.

Under the fourth requirement, the parties must have a clear mutual understanding that “the fixed salary is to be compensation for all straight time hours worked, whether few or many.” Mayhew, 125 F.3d at 219. The burden is on the employer to show the existence of a clear mutual understanding. Monahan v. County of Chesterfield, 95 F.3d 1263, 1275 n. 12 (4th Cir.1996). If the employer believed the employee was exempt from overtime compensation, “then it was not possible … to have had a clear mutual understanding … that [the employee] was subject to [a] calculation method applicable only to non-exempt employees who are entitled to overtime compensation.” Cowan v. Treetop Enter., 163 F.Supp.2d 930, 942 (M.D.Tenn.2001); (quoting Rainey v. Am. Forest & Paper Ass’n Inc., 26 F.Supp.2d 82, 102 (D.D.C.1998)).

Nipper Auto cannot establish the fourth requirement because its principal argument is that Brown is an FLSA-exempt employee not entitled to any overtime compensation; in the alternative, Nipper Auto argues that the parties had an implied understanding with Brown regarding his salary and overtime compensation. If Nipper Auto believed Brown was exempt, the requisite clear mutual understanding for the application of the FWW method could not have existed. Rainey, 26 F.Supp.2d at 102. Both parties understood that Brown would receive no additional salary no matter how many hours he worked in a given week, but § 778.114(a) specifies that the fixed salary does not include overtime premiums. The court finds that, because Nipper Auto believed Brown was an FLSA-exempt employee, it has failed to create a material issue of fact as to the clear mutual understanding required to apply the FWW method.

In addition to this clear mutual understanding, under the fifth FWW requirement, the employer must also demonstrate that the employee has actually received some form of overtime compensation. See Cowan, 163 F.Supp.2d at 941 (“Moreover, to comply 29 C.F.R. Section 778.114 requires a contemporaneous payment of the half-time premium for an employer to avail itself of the fluctuating workweek provision.”). Indeed, the Fourth Circuit has applied the FWW method only when the employee has received contemporaneous payment for overtime. See generally Flood, 125 F.3d at 252 (applying the FWW where the employer contemporaneously provided some form of overtime compensation); Griffin, 142 F.3d at 715 (same); Mayhew, 125 F.3d at 218 (same). It is undisputed that Nipper Auto did not pay Brown any overtime compensation during his employment. Because no form of overtime compensation was provided, Nipper Auto cannot apply the FWW method retroactively. Flood, 125 F.3d at 249; Griffin, 142 F.3d at 716. The court finds that Nipper Auto’s evidence is insufficient to allow a reasonable jury to conclude that Brown is subject to the FWW method of compensation; therefore, Brown’s overtime pay rate is one and one-half times his regular rate of pay. The court grants Brown’s motion for summary judgment on this matter.”

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