Have you ever wondered about the fluctuating workweek method for calculating the regular hourly rate or the overtime premium rate for employees who are paid a weekly salary? Most have probably not. But if you are one of the few employers who do use it, have we got a Connecticut Supreme Court case for you. 

In a decision officially released next week, the Connecticut Supreme Court in Stokes v. Norwich Taxi, LLC (download the advanced release opinion here), looks to the federal laws and regulations to determine the parameters of the fluctuating workweek method as applied in Connecticut.

For background, on the fluctuating workweek, The Wage & Hour blog had this good summary:

Employees who are compensated on a salaried basis and whose hours of work fluctuate from week to week may be paid a salary such that the fixed amount covers all straight time pay for whatever hours are worked in a given week. The following conditions must be met: 1) Hours must fluctuate from week to week; and, 2) There must be a clear and mutual understanding between the employee and employer that the fixed salary is compensation for the hours worked each work week, whatever the number; 3) The amount of salary must be sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked; and, 4) The agreed-upon salary must be paid even though the workweek is one in which a full schedule of hours is not worked.

This four-part test has formed the basis of several circuit court decisions.  The federal regulations on the subject are also helpful.  29 C.F.R. 778.114 can be found here.

So what did the court decide in Stokes? Well, first that the employer bears the burden of proving that the fluctuating workweek method applies under the facts of the case, not the employee.  The court then concluded that the employer failed to establish the second element of the four-part test (similar to the one above). 

The court also ruled on a number of other procedural issues, but those have minimal relevance for employers.

What’s the takeaway from this case for employers? Understand the fluctuating workweek method.  It is not used all that frequently and if it is used, it is not the easiest to follow. Getting legal counsel involved at the outset to structure the position appropriately may be the easiest way to avoid problems in the future.

Final word of warning: earlier this year, new regulations were proposed that would modify the regulations on the fluctuating workweek. So this may be the first and last time the Connecticut Supreme Court looks at this issue in this fashion. Stay tuned.