309 F. Supp. 3d 121
S.D. Ill.2018Background
- Bed Bath & Beyond (BBB) paid New York Department Managers (DMs) using the Fluctuating Work Week (FWW) method until March 2015; plaintiffs are five named DMs and 17 opt-ins challenging overtime pay for that period.
- Under BBB's plan each DM received a fixed weekly base salary (paid regardless of hours worked) plus additional pay for hours over 40 calculated by dividing the weekly salary by the actual hours worked that week (the FWW formula).
- DMs received written notices and pay stubs describing base salary, expected pay for a 47-hour week, and that overtime hourly rates would fluctuate under FWW.
- Plaintiffs point to a small number of weeks (initially 12, later six) in which some DMs were paid less than their base salary due to unpaid leave or payroll errors; plaintiffs argue these incidents disqualify BBB from using FWW and require a time-and-a-half calculation.
- Plaintiffs also contend that BBB’s practice of allowing bankers/alternate paid days off for holiday work constituted an hours-based bonus undermining FWW.
- The district court granted BBB summary judgment on FLSA and NYLL overtime claims, finding BBB properly implemented FWW; plaintiffs’ motions were denied and certain wage-notice NYLL claims were dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DMs were paid a fixed weekly salary (FWW element 2) | Docking or reduced pay in certain weeks (payroll errors, unpaid leave) shows salary was not fixed and FWW fails | Reductions were isolated (payroll errors, pro rata terminal pay, negotiated unpaid leave); vast majority of weeks base pay intact | Held for BBB: the underpayments were too few/isolated to negate intent to pay a fixed salary |
| Whether employers paid hours-based bonuses (undermining fixed salary) | Allowing employees who work holidays to “bank” an alternate paid day off is an hours-based bonus inconsistent with FWW | Allowing an alternative paid day off merely preserves parity of paid time off and is not extra compensation for hours worked | Held for BBB: holiday-banking is not an hours-based premium that defeats FWW |
| Whether hours “fluctuated” (FWW element 1) | Hours must fluctuate above and below 40 regularly for FWW to apply | Regulation requires only that hours vary week-to-week, not that they cross the 40-hour threshold both ways | Held for BBB: DMs’ hours did fluctuate; regulatory language does not require below-40 weeks to be frequent |
| Whether there was a clear mutual understanding of the FWW arrangement (FWW element 4) | Some DMs subjectively did not understand the mechanics; thus no mutual understanding | Written acknowledgments, annual notices, and pay stubs communicated the essential terms (fixed salary, fluctuating overtime rate) | Held for BBB: documentation establishes the required clear mutual understanding |
Key Cases Cited
- Overnight Motor Transp. Co. v. Missel, 316 U.S. 572 (1942) (established that dividing a fixed weekly salary by actual hours can yield the regular rate and that a 50% overtime premium over that regular rate complies with FLSA)
- O'Brien v. Town of Agawam, 350 F.3d 279 (1st Cir. 2003) (recognizes FWW as an approved method and explains half-time premium concept)
- Wills v. RadioShack Corp., 981 F. Supp. 2d 245 (S.D.N.Y. 2013) (discusses limits on FWW including impact of hours-based bonuses and DOL interpretations)
- Russell v. Wells Fargo & Co., 672 F. Supp. 2d 1008 (N.D. Cal. 2009) (discusses policy rationale for overtime premium and FWW mechanics)
- Hunter v. Sprint Corp., 453 F. Supp. 2d 44 (D.D.C. 2006) (interprets DOL opinion letters to require full salary notwithstanding personal absences unless disciplinary)
- Ramos v. Telgian Corp., 176 F. Supp. 3d 181 (E.D.N.Y. 2016) (construes regulatory language to require only that hours vary week-to-week, not that they fall both above and below 40)
- Heder v. City of Two Rivers, Wisconsin, 295 F.3d 777 (7th Cir. 2002) (explains policy tradeoffs of FWW and effect of variable weekly rates)
- Yourman v. Giuliani, 229 F.3d 124 (2d Cir. 2000) (addresses inquiry into employer's intent when evaluating salary-basis deductions)