12 | Classification Guidebook © 2024 Seyfarth Shaw LLP | www.seyfarth.com 40 (i.e., $769.23 35 hours = $21.978 regular rate x 1.5 = $32.967 overtime rate x 5 overtime hours = $164.84) Hybrid Method of Half-Time for Some Overtime Hours, and Time and One-Half for the Rest: If the employee’s schedule usually requires more than 40 hours per week, the employer could choose to pay the employee a salary meant to cover all regularlyscheduled hours, rather than just 40 per week. In this case, the regular rate is determined by dividing the employee’s weekly salary by the number of hours the salary is intended to cover, paying additional half-time pay for the overtime hours up to the number of regularly-scheduled overtime hours, and paying time and one-half only for overtime hours in excess of regularly-scheduled overtime hours. The following example demonstrates this hybrid overtime calculation method: If the employee receives a salary of $40,000 (i.e., $769.23/week) that is intended to cover 45 hours per week, and if she works 40 hours the first week, exactly 45 hours the second week, and 50 hours the third week, then the employee’s total compensation in these three weeks would be as follows: Week 1 (40 work hours): Most likely, $769.23.* Note: Depending on the business’s policies regarding non-exempt employees’ time off, and also depending on the documentation and communications around what the salary covers, it may be technically legal to reduce the employee’s salary for working fewer than 45 hours. There are, however, administrative and practical concerns with such deductions. This topic, like other decision-points, would justify consultation with legal counsel. Week 2 (45 work hours): $811.97, which is the weekly salary (i.e., $769.23), plus half-time for the 5 overtime hours (i.e., $769.23 45 hours = $17.094 regular rate x 0.5 = $8.547 overtime rate x 5 overtime hours = $42.74). Week 3 (50 work hours): $940.18, which is the weekly salary (i.e., $769.23), plus half-time for the first 5 overtime hours (following the same calculation as set forth for Week 2) and time and one-half for the additional 5 overtime hours (i.e., $769.23 45 hours = $17.094 regular rate x 1.5 = $25.641 overtime rate x 5 overtime hours = $128.21). Fluctuating Workweek Method: If the employee’s work hours fluctuate week to week, then the employer and employee could agree to a set salary intended to cover all hours worked each week, whether few or many. Under this arrangement, the employee would be owed only half-time for any overtime hours worked, and their regular rate of pay would fluctuate by week because it would be determined by dividing the weekly salary by all hours worked in that week. The following examples illustrate how the overtime rate of pay would vary: Note: The hybrid and fluctuating workweek methods are not allowed in all states. They should not be used, for example, in California, New Mexico, or Pennsylvania. This is not an exhaustive list. Consult with your Seyfarth lawyer to determine permissibility in your state.
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