On May 20, 2020, the US Department of Labor (“DOL”) announced a final rule that clarifies that payments in addition to the fixed salary are compatible with the use of the fluctuating workweek method of pay under the Fair Labor Standards Act (FLSA).

The final rule now allows employers to pay bonuses or other incentive-based pay to salaried, non-exempt employees whose hours vary from week to week without violating the fluctuating workweek method of calculating overtime pay. Previously, it has been the law that an overtime-eligible employee whose hours fluctuate from week to week and who agrees to receive a fixed weekly salary covering all hours of work is entitled to a halftime premium for hours worked in excess of 40 per week—not a “time and a half” premium.

Under the new final rule, the DOL:

• Amends Section 114 to confirm that employers can pay bonuses, premium payments, commissions, hazard pay, and other additional pay to employees paid on a FWW basis. (Such additional compensation must still be included in the regular rate unless they are excludable under sections 7(e)(1)–(8) of the FLSA [29 U.S.C. § 207(e)(1)-(8)].)
• Adds examples to Section 114 to illustrate these principles where an employer pays an employee, in addition to a fixed salary, a nightshift differential, a productivity bonus, or premium pay for weekend work.
• Changes the title of the regulation from “Fixed salary for fluctuating hours” to “Fluctuating Workweek Method of Computing Overtime.”

The final rule will go into effect in approximately 60 days.