It never seems to fail; I go on vacation and the Connecticut Supreme Court issues one of the few employment law decisions it issues every year during that week.

Fortunately for all of us, it concerns the fluctuating work week method of overtime computation which most employers in the state consciously either avoid or try not to understand.  (In very basic terms, the formula calculates a pay rate based on the number of hours an employee actually works in a particular weeks.)

I’ve previously discussed the “perils of trying to rely on a fluctuating work week.” As recently as 2012, I said that “while it can provide some benefit for employers, it must be done properly and must not be raised after the fact.”  And I noted way back in 2008 that employers have to jump through a variety of hoops to make sure they are compliant.

Add to this cautionary tale the latest Connecticut Supreme Court case of Williams v. General Nutrition Centers, Inc. 

The court held that overtime pay for retail employees who receive commission cannot be calculated using the federal fluctuating workweek formula.

And beyond that, the court raised two important principles.  

First, it said that Connecticut law does not prohibit the use of the fluctuating method in general. Thus, for most employers and most employees, the use of the fluctuating work week is definitely in play.

Second, and perhaps most critical here, the Court said that Connecticut Department of Labor regulations that govern overtime pay for retail employees do prohibit the use of the fluctuating method for those employees:

By setting forth its own formula for mercantile employers to use when computing overtime pay, one that requires them to divide pay by the usual hours worked to calculate the regular hourly rate, the wage [regulation] leaves no room for an alternative calculation method….The wage order’s command to use a divide by usual hours method therefore precludes use of the fluctuating method’s divide by actual hours method, except, of course, when an employee’s actual hours match his usual hours.

It should be noted as well that while the case concerned retail employees, the regulation at issue applies to all businesses in the “mercantile trade.”

For employers that rely on the fluctuating workweek method of calculating overtime in Connecticut, this case is a good reminder to revisit those practices now to make sure they comply with this new Connecticut case. Seeking the advice of your trusted counsel to look at your particular circumstances is critical given the court’s decision.

UPDATED

In a decision sure to send chills to employers with small branch offices in Connecticut, a Superior Court judge recently ruled that an employer’s out-of-state employees must be counted in figuring out if an employer is subject to the state’s FMLA rules.

Employers with 75 or more employees nationwide that have just one employee in Connecticut, may now be subject to Connecticut’s FMLA rules for that Connecticut employee. 

This has huge implications for employers with small branch offices in Connecticut that, in the past, were not viewed as being covered under the state FMLA. It also has implications for employers based in Connecticut with less than 75 employees here but that have out-of-state workers. 

Here’s the context:

Under federal FMLA law, an employer is subject to the FMLA when they employ 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year.  But only certain types of employees are covered: The employee must be employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite.

In Connecticut, things are a little messier because Connecticut has its own version of FMLA that overlaps at times with the federal one.  Under CTFMLA (Conn. Gen. Stat. 31-51kk(4), an employer "means a person engaged in any activity, enterprise or business who employs seventy-five or more employees."  The language of the Connecticut law, however, does not have the same limitations on the "75 miles of the worksite" language found in federal law.

Nonetheless, the Connecticut Department of Labor has long taken the position that only Connecticut employees should be used in the calculation of determining whether a company is an "employer" under CTFMLA.   Part of that arises from the fact that it seems natural to conclude the Connecticut only has jurisdiction over the part of the employer that is actually IN Connecticut.

But the Superior Court’s decision is Velez v. Mayfield throws that analysis up in the air (download here.) (H/T Law Tribune.)

In Velez, the Court overturned the Labor Department Commissioner’s decision approving of a hearing officer’s ruling. In doing so, the Court concludes that the DOL has made an "error of law."  It does so by concluding that the legislative history and the language of the statute itself require that all employees of an employer must be included, not simply those that work in Connecticut:

In light of the purpose behind the 75-person exemption, the court cannot interpret the term "employee" as restricted to Connecticut employees so as to prohibit multi-state linking of employees. Such an interpretation would not only ignore the purpose of protecting Connecticut’s small employers but also skew  the exemption in favor of entities that employ few Connecticut residents but have large numbers of personnel in other states.

Although this decision is likely to be appealed, its implications are potentially huge because, if allowed to stand, it would now provide leave rights to a group of employees who have never been understood to have those rights before. 

Here’s an example of how this decision might work in practice:

Suppose an employer has 2 employees in each of the 50 states.  Although the employer has 100 employees, none of those employees would be eligible for FMLA because of the worksite rules in the FMLA.  However, those two Connecticut employees would now be eligible for Connecticut’s FMLA because under Velez, the employer would be deemed to employ over 75 employees. 

For now, the decision is simply one Superior Court decision and it is unclear what the Connecticut Department of Labor’s stance will be going forward pending a possible appeal.  Out-of-state companies with smaller Connecticut offices should certainly consult legal counsel however, to determine the possible impact that decision may have on the business and the approach that the employer wants to take in this time of uncertainty. 

UPDATE: I have since learned that the Connecticut Department of Labor does indeed plan to appeal the decision. Stay tuned.