Employment Law Daily Whether fluctuating workweek method was agreed to is still an open question
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Tuesday, August 8, 2017

Whether fluctuating workweek method was agreed to is still an open question

By Joy P. Waltemath, J.D.

Reversing a partial summary judgment order requiring that if certain security shift supervisors were found to be wrongly classified as exempt from overtime, their regular rate of pay would be calculated via the fluctuating workweek method, the Fifth Circuit ruled that their alternating, biweekly schedule of 36 hours and then 48 hours every other week was not clearly agreed by the employees to compensate them for an unlimited number of hours worked. Because of this factual dispute and the disputed inferences from it, the appeals court reversed the fluctuating workweek summary judgment ruling, which together with another partial summary judgment ruling had the effect of making two individuals’ potential recoveries offset entirely by discretionary bonuses that were paid and resulted in their dismissal from the suit. The appeals court’s reversal resulting in their reinstatement in the litigation (Hills v. Entergy Operations, Inc., August 4, 2017, Higginbotham, P.).

Misclassification litigation. Nineteen employees of Entergy Operations, Inc., which operates a nuclear power plant, had formerly worked for Wackenhut as security contractors and were hired on for full-time jobs at Entergy as security shift supervisors, which the company classified as exempt from the FLSA’s overtime guarantee. They later brought a misclassification action, seeking backpay for allegedly underpaid overtime hours. The parties cross-moved for summary judgment on the classification issue, which has yet to be decided, and it was not before the appeals court.

Partial summary judgment rulings. Instead, the appeals court was considering a partial summary judgment ruling that, should the employees be found misclassified, the fluctuating workweek (FWW) method would apply to calculate their regular rate of pay for determining their proper overtime rate. (The district court also entered summary judgment that any backpay awarded would be offset by the amount of discretionary bonuses each employee had been paid. Neither of these interlocutory rulings would typically be appealable with the case still pending in the district court, but their combined effect was to eliminate any recovery for two of the employees. Applying the FWW method to their claims resulted in recoveries that would be offset entirely by bonuses paid, and so the lower court had dismissed their claims and entered a final judgment against them. They appealed that final judgment here.)

FWW application premature. That judgment was premature, said the Fifth Circuit, reversing and remanding. It assumed for appeal purposes that the employees were misclassified and were owed overtime backpay. The question was whether the fluctuating workweek method applied to the calculation of their regular rate of pay, and there was conflicting evidence on this point that should have precluded summary judgment.

Agreement? After discussing how to determine a salaried employee’s regular rate of pay for overtime computation purposes, the appeals court talked about the conceptual complexity posed by salaried employees who do not have a fixed number of hours that they are expected to work each week. “When an employee has agreed to this arrangement, her workweek is said to ‘fluctuate,’ so her regular rate of pay is determined by the ‘fluctuating workweek method’” under which both the regular hourly rate and the proper overtime compensation can vary from week to week. In order to use the FWW method, however, the parties must have agreed to a fixed weekly wage for fluctuating hours, which is a question of fact.

Here, the undisputed evidence established that, at a minimum, the employees agreed to work and have their salary compensate for an alternating, biweekly schedule of 36 hours and 48 hours every other week (three 12-hour shifts one week; four 12-hour shifts the next). Beyond that, the employees contended and had evidence that they believed their schedules would be limited to the alternating 36- and 48-hour weeks. The company argued and had evidence that the employees knew they would be required to work more than that baseline—for example, if one of their security officers did not show up to work. Consequently, the appeals court cited that conflicting evidence and interpretations drawn from it as sufficient to raise a genuine issue of fact as to the parties’ agreement.

Is fixed alternating schedule “fluctuating?” However, the district court thought that the employees’ admission that their weekly schedule was to alternate between 36 hours and 48 hours meant that it was “fluctuating” within the meaning of the fluctuating workweek method. That was too literal for the Fifth Circuit, which said the FWW method may be applied only where the employee “clearly understands” that her salary is intended to compensate any unlimited amount of hours she might be expected to work in any given week. An alternating schedule is not necessarily “fluctuating” as that term of art is used in the FWW method, reasoned the appeals court, disagreeing with a 1998 Fourth Circuit case, Griffin v. Wake County.

Importantly, the Fifth Circuit did not foreclose the application of the fluctuating workweek method—the trier of fact was to determine whether it applied here. But the district court’s pretrial ruling as a matter of law was premature on this disputed record. Reversal on this issue alone revived the two employees’ dismissed claims because their base recoveries might be high enough to withstand the bonus offsets. As such, the court did not need to address whether summary judgment as to the offsetting bonuses was appropriate. Instead, it reversed summary judgment that the fluctuating workweek method applied here as a matter of law and remanded for the lower court to reinstate the employees into the pending lawsuit.

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