Overview. Under federal law, the fluctuating workweek (FWW) method may be used to calculate overtime pay for employees without a consistent hourly rate of pay, e.g., salaried employees whose work hours fluctuate above and below 40 hours per week or employees who receive commissions.
Using the FWW method, an employee’s “regular rate” of pay is calculated each week by dividing his total weekly pay (including any commissions) by the actual number of hours he worked that week. The “overtime rate” is calculated by multiplying this regular rate by 1.5. For example, if an employee has a weekly salary of $500 and works 50 hours in a given week, his regular rate is $10 per hour ($500/50), and his overtime rate is $15 per hour ($10 x 1.5). Because the employee has received only $10 per hour for each hour worked, he must be paid an additional $5 for each overtime hour to attain the required $15 per hour rate for all hours in excess of 40.
Details. Just as under federal law, Connecticut requires that certain employees receive 1.5 times their regular rate of pay for overtime hours worked. Interpreting the state’s statutory provision, the state Department of Labor published Wage Order § 31-62-D4 (“Wage Order”) establishing that “[w]hen an employee is paid a commission in whole or in part of his earnings, the regularly hourly rate for the purpose of computing overtime shall be determined by dividing the employees total earnings by the number of hours in the usual work week[.]”However, this Wage Order applies only to employees in the “mercantile trade,” which generally has been defined as those employed in the retail sales industry.
In Williams v. General Nutrition Centers, Inc. a group of managers at GNC’s retail stores claimed they were paid a base weekly salary plus commissions on premium merchandise sold. They also were paid overtime when they work more than 40 hours per week.
According to the managers, their overtime pay was wrongly calculated using the FWW pay method. They argued the Wage Order directs that their pay be based on the number of hours they usually worked, as opposed to the number of hours they actually worked in a particular week. The Connecticut Supreme Court agreed that the FWW pay method was not permitted with respect to retail.
Call to Action. Connecticut employers in the retail industry should consult with experienced legal counsel about the impact of this decision on their pay practices (if any).