The Department of Labor issued a final rule allowing employers to include bonuses, premium payments, and other pay when using the fluctuating workweek method of calculating overtime.

Under the FLSA, an employer may use the fluctuating workweek method if the employee works varying hours from week to week and receives a fixed salary as straight-time compensation for whatever hours the employee works in a workweek pursuant to a clear and mutual understanding with the employer.

The new rule takes effect on July 14, 2020, and employers may then begin to include bonuses and other premium payments in their calculations. Employers may also consider utilizing the fluctuating workweek method to mitigate costs associated with varying schedules and re-opening after COVID-19 closures.

Before the DOL’s final rule, courts had grappled with whether to include other types of compensation under the fluctuating workweek method. Many states, including Pennsylvania and New Jersey, still prohibit employers from using this method of calculating overtime pay.