Connecticut Supreme Court Upholds Fluctuating Workweek Method . . . But Not For Retail Employees

The Connecticut Supreme Court's holding in Williams v. General Nutrition Centers, Inc., No. SC 19829 (August 17, 2017) is a mixed bag for Connecticut employers. While the court held that Connecticut law does not generally prohibit an employer's use of the fluctuating workweek method to calculate a nonexempt employee's hourly overtime rate, it also held that a Connecticut Department of Labor wage order does prohibit its use in connection with mercantile employees, which includes retail employees.

Background

The plaintiffs in Williams worked as nonexempt managers at General Nutrition Centers (GNC) stores in Connecticut. They were paid a fixed weekly salary, along with commissions based on the sale of merchandise. They were paid overtime whenever they worked more than 40 hours in a week.

Although their base salaries were fixed, their commissions fluctuated from week to week, based on sales in their respective stores. GNC chose to calculate the plaintiff's overtime rate using the fluctuating workweek method.

Under this method, which was developed under the federal Fair Labor Standards Act (FLSA), if certain criteria are met, a salaried, nonexempt employee's regular rate of pay for overtime purposes can be calculated by dividing the employee's total weekly pay in a given week by the number of hours they actually worked during that week. Thus, the employee's regular rate, and, therefore, his overtime pay rate, decreases with each additional hour worked.

Whether an employer can utilize the fluctuating workweek method is a fact-specific inquiry. For example, the U.S. Department of Labor takes the position that the following requirements should be met for the fluctuating workweek method of calculating overtime to be utilized: (1) the employee's hours must fluctuate from week to week; (2) the employee must receive a fixed salary that does not vary with the number of hours worked during the week, excluding overtime premiums; (3) the fixed amount must be sufficient to provide compensation every week at a regular rate that is at least equal to the minimum wage; and (4) the employer and employee must share a clear mutual understanding that the employer will pay that fixed salary regardless of the number of hours worked.

The plaintiffs in Williams filed a class action lawsuit against GNC, alleging that GNC's use of the fluctuating workweek method violated Connecticut law. Citing to a wage order issued by the Connecticut Department of Labor pertaining to...