There had been an initiative to change the regulations regarding the fluctuating work week (“FWW”) computation of overtime found in 29 CFR 778.114 by allowing the payment of non-overtime bonuses and incentives without invalidating the guaranteed salary criterion required to allow an employer to pay half-time overtime under the formula set forth in the regulation.
There was opposition to this. The opposition took the view that this change would allow employers to reduce employee fixed weekly salaries and shift the bulk of the employee compensation to bonus and premium pay. These commenters believed that the change would lead to significant variations in weekly wages based on hours worked and that such variations were inconsistent with the concepts behind the fluctuating work week method of compensation.
The US Department of Labor accepted the view of these opponents, or perhaps, was afraid to make the changes that the new times in which we live might have commanded. The agency concluded that such incentive and bonus payments were incompatible with the FWW procedure. The agency feared that the change could have induced employers, intentionally or not, to shift a large portion of employee compensation to such bonus payments, potentially resulting in wide disparities in employees’ weekly pay depending upon the number of hours that they worked in a given week. Thus, other than changing the example in the current regulations to comport with the new minimum wage, the regulation has been left unchanged.
I believe the DOL missed an opportunity to bring this longstanding regulation into the 21st Century. It is a widespread truism that non-exempt employees are receiving bonuses and other premium-type payments in addition to their salaries and these incentive elements are becoming more and more accepted by employees as components of their compensation. In my view, it would have been logical and consistent to permit such payments under the FWW compensation method.
I guess the DOL was afraid that the employer community would seize upon such a change as a “new” way to hurt their employees. In my practice, I deal with employers all of the time and I have more faith in the employer community, i.e., there is by no stretch of the imagination the malevolent intent to use a DOL regulation to hurt people. Simple as that.