50 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP employees on a monthly or semi-monthly basis, so these methods are inapplicable in Massachusetts for employers subject to the Wage Act.281 9. Calculation of the Regular Rate Using the Fluctuating Workweek Method (FWW) Under both Massachusetts and federal law, employers may pay a non-exempt employee a fixed salary intended to cover all hours worked each workweek where the employee’s number of hours worked each week varies (fluctuates), regardless of the number of hours the employee actually works, provided that the following conditions are satisfied:282 The employer and employee have a “clear and mutual understanding,” preferably in writing, that the employee will receive a fixed amount regardless of how many hours the employee actually works in a workweek (this includes both weeks in which the employee works more than forty hours per week and weeks in which the employee works less than forty hours per week). The hours that an employee works per week must fluctuate. The employee must be paid an additional one-half of his or her regular hourly rate for all hours worked over forty (this takes into account the fact that the employee has already been compensated for all hours worked at straight-time). The salary is sufficient to provide no less than the minimum wage for each hour worked.283 Because the fixed salary is intended to compensate the employee at straight-time rates for whatever hours are worked in the workweek, the employee’s regular rate will vary from week to week and must be calculated for each week.284 The regular rate is determined by dividing the number of hours worked in the workweek into the amount of the weekly salary to obtain the 281 M.G.L. ch. 149, § 148. 282 29 C.F.R. § 778.114. While no Massachusetts statute or regulation directly addresses this method of calculating overtime, both the SJC and the First Circuit have recognized that the fluctuating workweek method is permissible under Massachusetts law. See Valerio v. Putnam Assocs., Inc., 173 F.3d 35, 39-40 (1st Cir. 1999); Goodrow v. Lane Bryant, Inc., 432 Mass. 165, 177 (2000). 283 29 C.F.R. § 778.114. 284 Id. In 2011, the DOL rejected proposed regulations that would have clarified what constitutes a “fixed salary” for purposes of the fluctuating workweek method of payment. The regulations would have permitted employers to pay bonuses and premiums to employers whose pay is calculated using this method. In rejecting this proposed regulatory change, the DOL stated that it believed that bonuses—particularly those tied to an employee’s hours of work—are inconsistent with the fluctuating workweek. Updating Regulations Issued Under the Fair Labor Standards Act, 76 Fed. Reg. 18,832, 18,848-18,850 (Apr. 5, 2011). In a 2016 decision, Lalli v. General Nutrition Centers, 814 F.3d 1 (1st Cir. 2016), the First Circuit rejected the DOL’s position and approved the use of the FWW method where commissions are paid as part of an employee’s compensation. The First Circuit concluded that “the payment of a performance-based commission does not foreclose the application of section 778.114 [the FWW regulation] with respect to the salary portion of the pay structure at issue.” Lalli, 814 F.3d at 4. The court thus distinguished performance-based commissions from hours-based bonuses (such as shift differentials), which offend the FWW’s “fixed salary” requirement. Id. at 8. Lalli is the only appellate decision addressing whether performance-based commissions are compatible with the FWW method of pay.
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