Wage and hour litigation has been on a meteoric rise and is unlikely to slow in 2014. Nationally, employers paid over $245 million in 2013 to resolve wage and hour cases. In Texas, Fair Labor Standards Act (FLSA) cases continue to be among the most commonly filed in federal courts. Many of these cases allege plaintiffs are due overtime after being misclassified as exempt employees.
Two recent rulings by the U.S. Court of Appeals for the Fifth Circuit define an employer’s ability to resolve these cases at a discount by applying the fluctuating work week (FWW) method of calculating damages. These savings can be significant — for example, with an employee who earns $45,000 annually and averages 45 hours per week, an employer can save $15,000 over the three year look-back permitted by the FLSA by applying this method — and multiply when considered in the common context of collective actions.
The FWW method is authorized by the FLSA. Where the employer and employee agree and the employee works a varying number of hours per week, the employee receives reduced overtime pay. The employee is paid a weekly salary, which compensates the employee for all “regular” hours worked. For each hour of overtime, the employee receives the premium amount of “half-time” instead of the traditional time and a half. This method can save employers two-thirds of the potential damages in a misclassification suit. Although a circuit split exists, the Fifth Circuit routinely approves retroactive application of this method in misclassification cases.
