Continuing the recent string of good news for employers on the fluctuating workweek (“FWW”) front, last week a federal judge in the Southern District of New York held that RadioShack’s use of the FWW or “half-time” method to calculate overtime pay for managers was permissible under New York Labor Law (“NYLL”), even though the company paid performance-based bonuses.
As we reported recently [here] and [here], courts have been showing their support for the FWW method recently, calculating damages in misclassification cases by providing a “half time” premium, under which the employee receives an overtime payment of .5x, rather than a “time and a half” premium of 1.5x.
In his November 7, 2013 decision, Judge Paul A. Engelmayer granted RadioShack’s motion to dismiss an ex-store manager’s putative class action accusing the company of miscalculating overtime pay for its managers under the NYLL.
Judge Engelmayer first held that since the NYLL “in all pertinent respects tracks the [FLSA]”, the same rules that govern the FWW under the FLSA apply to overtime claims under the NYLL. The crux of the case was whether a U.S. Department of Labor (“DOL”) May 5, 2011 Final Rule prohibits employers from using the FWW method to calculate overtime pay where the employer also paid its employees bonuses.
In reaching his conclusion, Judge Engelmayer distinguished between performance-based and hours-based bonuses. The latter involve situations “when an employer pays its employees additional money for hours worked during weekends, holidays, or nights.” In these situations “the employees who work such premium hours will earn more than those who work normal, non-premium hours,” thereby offending the FWW’s requirement of a “fixed weekly salary.”
The same, however, cannot be said about performance-based bonuses. Specifically, the decision explains that “[t]he lack of any reference, direct or indirect, to performance-based bonuses in the DOL’s Final Ruling is, in this Court’s view, the proverbial dog that did not bark.” In other words, if the DOL had intended its rule to affect both hours-based and performance-based bonuses, “it is hard to imagine that the DOL would not, somehow, have said so.”
Therefore, Judge Engelmayer held that the DOL’s Final Ruling “was not intended to, and does not, disturb the law permitting employers to use the FWW method to calculate the overtime pay of workers who receive performance bonuses.”
This thorough decision once again benefits employers defending misclassification cases and reflects the continued acceptance by courts around the country of the FWW method of calculating overtime damages under both federal and state law. It also provides important guidance to employers in determining how they can provide additional compensation to employees paid under the FWW.