On May 20, 2020, the U.S. Department of Labor (DOL) published its final rule allowing employers to pay bonuses and incentives to employees who are paid a salary plus overtime on the fluctuating workweek method (FWM) of computing overtime (employees who are paid a salary whether they work few hours or many, plus 1/2 overtime rate – usually seasonal businesses such as landscaping – see my earlier post about how this method works if you are interested). In the past, additional payments would cause the pay structure to be defeated (improper), resulting in additional overtime due for each hour worked. In other words, employers had a disincentive to pay employees additional compensation such as bonuses. Now, certain additional payments are compatible with the use of the fluctuating workweek method under the Fair Labor Standards Act (FLSA).
The final rule amends 29 CFR 778.114(a) by allowing employers to pay bonuses, premium payments, or other additional pay (i.e. commissions and hazard pay), to FWM employees (but the pay must be included in the calculation of the regular rate unless excludable under FLSA sections 7(e)(1)–(8)). The final rule cleans up the rule (makes it easier to read) and adds examples related to night shift differentials and productivity bonuses. Finally, the title of the regulation was changed from “Fixed salary for fluctuating hours” to “Fluctuating Workweek Method of Computing Overtime” (which is how the Courts refer to it).