It’s been decades since Congress enacted the Fair Labor Standards Act of 1938 (FLSA). This is the federal law that, in part, guarantees workers overtime pay for hours worked over 40 in a single workweek. Yet how to remedy a company’s FLSA violations remains a topic for debate. To illustrate the debate, imagine an employee works 60 hours a week, while earning a weekly salary of $600. This employee later files suit alleging he was wrongfully denied overtime compensation, and contends he is entitled to time-and-a-half pay for all hours worked over 40 each week for the last three years. The company disagrees, taking the position that if the employee is entitled to back overtime pay, he is only entitled to one-half pay for hours worked over 40.

This method is known as the fluctuating workweek method, and companies have attempted to apply it in order to drastically reduce their liability. In the above example, based on the time-and-a-half pay method, the employee would be entitled to $70,200 in back wages. Based on the one-half pay method, the employee would only be entitled to $15,600 in back wages. The differing calculations would result in a difference in damages of $54,600, which is extremely beneficial to the employer.

Recently, a court rejected an employer’s attempt to use this economically-advantageous calculation. In Perkins v. Southern New England Telephone Co., the District of Connecticut court found that applying the fluctuating workweek method of overtime compensation requires that an employer actually contemporaneously pay an overtime premium of one-half pay for overtime hours in addition to the employee’s salary. Further, the court noted that allowing an employer to take advantage of this approach actually provides a perverse incentive to violate the law by creating a windfall for the employer if found liable. Thus, the court held that the employer couldn’t apply the fluctuating workweek method when calculating FLSA damages. This was a real victory for employees. If you have any questions about this type litigation contact Lance Gould or Larry Golston in our Consumer Fraud Section at 800-898-2034 or by email at Lance.Gould@beasleyallen.com or Larry.Golston@beasleyallen.com.