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.

Last month, it was the EEOC that released new regulations on the ADA.  This week, it’s the Wage & Hour Division of the Department of Labor, that has released new regulations on the Fair Labor Standards Act.  The new regulations will go into effect in early May 2011.

While some of these revisions are more technical in nature, there are some others which could have an impact on employers and some portions which aren’t revisions, but additions.  Here are a few highlights:

  • For employers that use a fluctuating workweek method of payment of employees (in which an employee is paid a fixed salary for fluctuating hours), there had been some discussion that the DOL might allow bonus payments in such instances. Instead, the DOL questioned such payments noting that "bonus and premium payments … are incompatible with the fluctuating workweek method."

Connecticut employers should remember the guidance that came out from the Connecticut Supreme Court back in 2008 about this method as well.  In that case, the Court looked to the federal regulations for guidance on interpreting state laws; the new regulations further complicate that and therefore, employers that use the fluctuating workweek method ought to consult with an attorney to ensure that it will be in compliance with the new regulations.

If you’d like more information about it, there’s a notable blog post from the Wage & Hour Litigation Blog here. 

  • Another major area that the regulations addressed was whether an employer has to "inform" an employee of tip credit provisions.  The DOL stated that employers do need to "inform" the employees of the tip credit, but also notify the employee of various items before utilizing the method. These items include:
    • the direct cash wage the employer is paying the employee
    • the amount the employer is using as a credit against tips received

The regulations contain a more detailed list of information to be provided.  Therefore restaurants in particular should review these items and make sure that their policies and practices will be compliant with these new regulations.

Of course not all of the revisions are notable. In one area, the regulations revise existing regulations to remove the words "firefighter" and replace them with "employee in fire protection activities". 

You can download all of the regulations here