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DOL Revised Overtime Regulations Affect the Fluctuating Workweek Method of Payment

04.12.2011

On April 5, 2011, the Department of Labor, Wage and Hour Division finalized changes to several Fair Labor Standards Act regulations. The revisions are of particular significance to the funeral industry and other employers who compensate salaried, non-exempt employees under the Fluctuating Workweek Method of Payment.

As we know, Funeral Directors and Embalmers are considered non-exempt meaning that they must receive minimum wage, maintain an accurate record of time and receive overtime for hours worked in excess of 40 hours per week (unless in the states of Minnesota and Ohio). As such, SESCO has strongly recommended the use of the Fluctuating Workweek Method of Payment as it allows employers to fix compensation under a guaranteed salary basis and subsequently pay half-time (.5) for hours worked in excess of 40 hours per week versus time and one-half (1.5) under an hourly pay plan.

The Wage and Hour Division has rejected a proposal to allow those employees being compensated through a fixed salary/Fluctuating Workweek Method of Payment to be paid bonuses and other non-overtime premiums without invalidating the Fluctuating Workweek Method of Payment. The Wage and Hour Division of the Department of Labor acknowledged that bonus payments and other forms of premium pay benefit employees, but ultimately concluded that the proposed clarifying language "could have had the unintended effect of permitting employers to pay a greatly reduced fixed salary and shift a large portion of the employee's compensation into bonus and premium payments..."

The Division's interpretation means that employers who pay employees via the Fluctuating Workweek Method of Payment cannot pay employees additional premium amounts such as bonuses and other non-overtime premiums. The Fluctuating Workweek Method of Payment can be utilized; however, an employer cannot provide additional bonus or other monthly, quarterly or annual bonus payments unless considered completely discretionary, re: Christmas Bonuses.

As this change will affect the industry significantly, it is suggested that if you currently compensate employees via the Fluctuating Workweek Method of Payment, you contact SESCO immediately to discuss the implications of the changes, schedule a Wage and Hour compliance assessment and/or discuss optional pay plans.

Further, SESCO will be updating its Wage and Hour compliance manual for the funeral industry which will be made available to SESCO clients and members of NFDA and other state associations for a reduced fee of $35.00. Contact SESCO with any questions or to order the manual.

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