Mass-Peculiarities: An Employers Guide to Wage & Hour Law in the Bay State 2022 Edition

78 | Massachusetts Wage & Hour Peculiarities, 2022 ed. © 2022 Seyfarth Shaw LLP • The salary is sufficient to provide no less than the minimum wage for each hour worked. 425 Because the fixed salary is intended to compensate the employee at straight-time rates for whatever hours are worked in the workweek, the employee’s regular rate will vary from week to week and must be calculated for each week. 426 The regular rate is determined by dividing the number of hours worked in the workweek into the amount of the weekly salary to obtain the applicable hourly rate for that week. 427 The employee is then entitled to overtime compensation in the amount of one-half times the regular rate for all hours worked over forty hours per week (because the salary provides straight-time pay for all hours worked). Under a fluctuating workweek method, the more hours worked, the lower the regular rate and, thus, the overtime premium will be. Example 1: An employee is paid $1200 per week and works 50 hours. The employee’s regular rate is $24.00, which is calculated by dividing the $1200 weekly salary by the total number of hours worked ($1200 ÷ 50 = $24.00 per hour). The employee would be entitled to $120.00 of overtime pay (.5 x $24.00 x 10 overtime hours), or $12.00 per each hour of overtime. Example 2: An employee is paid $1200 per week and works 60 hours. The employee’s regular rate is $20.00, which is calculated by dividing the $1200 weekly salary by the total number of hours worked ($1200 ÷ 60 = $20.00 per hour). The employee would be entitled to $200.00 of overtime pay (.5 x $20.00 x 20 overtime hours), or $10.00 per each hour of overtime. The employer bears the burden of demonstrating the existence of a clear and mutual understanding regarding how overtime will be calculated. Hence, the best practice for an employer is to have the employee sign a written agreement that describes the fluctuating workweek method in clear and unambiguous terms prior to paying the employee pursuant to this method. However, at least some courts have held that the requisite “clear and mutual understanding” may be established in the absence of a written agreement by the employee’s 425 29 C.F.R. § 778.114. 426 Id . In 2011, the DOL rejected proposed regulat ions that would have clarified what const itutes a “ fixed salary” for purposes of the fluctuat ingworkweek method of payment . The regulat ions would have permit ted employers to pay bonuses and premiums to employers whose pay is calculated using this method. In reject ing this proposed regulatory change, the DOL stated that it believed that bonuses—part icularly those t ied to an employee’s hours of work—are inconsistent with the fluctuat ingworkweek. Updating Regulations Issued Under the Fair Labor Standards Act , 76 Fed. Reg. 18,832, 18,848-18,850 (Apr. 5, 2011). In a 2016 decision, Lalli v. General Nutrition Centers , 814 F.3d 1 (1st Cir. 2016), the First Circuit rejected the DOL’s posit ion and approved the use of the FWW methodwhere commissions are paid as part of an employee’s compensat ion. The First Circuit concluded that “ the payment of a performance-based commission does not foreclose the applicat ion of sect ion 778.114 [the FWW regulat ion] with respect to the salary port ion of the pay st ructure at issue.” Lalli , 814 F.3d at 4. The court thus dist inguished performance-based commissions from hours-based bonuses (such as shift different ials), which offend the FWW’s “ fixed salary” requirement . Id . at 8. Lalli is the only appellate decision addressing whether performance-based commissions are compat ible with the FWW method of pay. 427 29 C.F.R. § 778.114.