Fluctuating Work Week Method Of Compensation Is Permissible For Certain Nevada Employees

In a recently published Advisory Opinion, the Nevada Labor Commissioner has opined that Nevada employers may use the fluctuating workweek method to compensate certain types of nonexempt Nevada employees.

What is the fluctuating workweek method?

The fluctuating workweek method is a accept method of compensation under the Fair Labor Standards Act for nonexempt employees who are paid a fixed salary for all hours worked. Under this method, the employer and employee have come to an understanding that the employee will receive the fixed salary as straight time pay for whatever hours he is called upon to work in a workweek – no matter how few or how many.

If the employee works over 40 hours in a workweek, the employer then pays the employee overtime based on one-half the employee’s regular rate of pay. The regular rate of pay is calculated by dividing the employee’s weekly salary by the total hours the employee worked that week. That number is then divided in half to determine the overtime rate – because the employer and employee previously agreed that the salary compensated the employee for all straight time hours worked.

What did the Nevada Labor Commissioner opine?

The Labor Commissioner found that the fluctuating workweek method of compensation was permissible for fixed salary nonexempt employees. In addition, he also found that fluctuating workweek method of compensation is also permissible where a fixed salary employee is also paid commissions and bonuses provided that those commissioner and/or bonuses are included in the weekly amount of pay when determining the employee’s regular rate of pay.

Take home for employers

While the fluctuating workweek method is a accept method of compensation in Nevada, it is recommended that Nevada employers consult with an HR Professional or legal counsel before using this method of payment with their employees.