On October 11, 2013, the Fifth Circuit Court of Appeals tripled an overtime payment award after finding that the Northern District of Texas Court erred when it applied the Fluctuating Workweek Method (FWW method) to an FLSA misclassification case. The FWW is an employment arrangement in which an employee receives a fixed weekly pay for a fluctuating work schedule with a varying number of hours worked each week.
In this case, Black v. SettlePou, the Plaintiff was employed as a legal secretary and was promoted to a paralegal. She was non-exempt employee, which means that she was eligible for overtime pay under the FLSA. During her employment, the Plaintiff was informed that she would begin supervising another employee and would, therefore, be reclassified as exempt, making her ineligible for overtime pay. However, Plaintiff was not given any real supervisory authority and continued to perform similar work tasks without being paid overtime. The Plaintiff made it known to her employees that she did not agree with the decision to reclassify her as an exempt- employee because she thought she would be paid overtime for her extra hours worked, which amounted to 274 hours. The District Court calculated the amount of overtime premiums owed to Plaintiff by multiplying her 274 overtime hours by one-half of her hourly pay rate – using the FWW method, which is used for non-exempt employees who are paid a salary. In addition, Plaintiff was awarded liquidated damages as required under the FLSA. Thereafter, Plaintiff argued that the District Court erred in awarding only half the regular hourly rate for the overtime hours instead of one and one-half times the regular hourly rate of pay.
The Fifth Circuit Court explained that “[t]he FWW method of calculating overtime premiums in a misclassification case is appropriate when the employer and the employee have agreed that the employee will be paid a fixed weekly wage to work fluctuating hours,” and “the question of whether an employer and employee agreed to a fixed weekly wage for fluctuating hours is a question of fact.” In this case, the Fifth Circuit Court decided that the evidence shows that Plaintiff “would be given a fixed weekly salary and time and one-half of her regular hourly pay for any hours worked beyond forty”. However, the fact that Plaintiff would be given a fixed weekly salary does not show that she agreed that it would compensate her for all the hours she worked every week and the fact that she complained to Human Resources about it shows that she never agreed to work overtime without receiving overtime payment. As a consequence, the District Court should not have applied the FWW method to Plaintiff, who should be compensated for one time and a half for hours worked overtime.
This case shows that it is important for employers to classify their employees correctly and to make sure that employees understand and agree with their classification, as an exempt employee or a non-exempt employee.