The fluctuating workweek method is a formula for calculating overtime that was formerly referred to as "Chinese overtime." It is legal under federal law and the laws of most states, but only if all of the law's requirements are followed.
Violations of the fluctuating workweek rules most often occur under these circumstances:
1. The employee works a regular schedule and her hours do not fluctuate.
2. The employer fails to include all proper payments to the employee when calculating the hourly rate. Where an employer fails to include commissions, bonus or holiday pay into the hourly rate calculation, it may be violating the fluctuating workweek rules.
3. The employer fails to pay his employees the full base salary in weeks where the employee works less than forty hours in a week. The employer cannot have it both ways. If the employer is going to pay a base salary, the salary has to be paid whether the employee works more than forty hours or not.
4. The employee works so many hours in a week that the hourly rate falls below the minimum wage.
5. The employee and employer did not have an agree that they would be paid according to the fluctuating workweek method.
This formula allows an employer to save money on overtime costs. Compared to the standard overtime calculation method, an employee paid under the fluctuating workweek method could be earning hundreds of dollars less per week. However, when employers don't follow the strict rules required to use this method of payment, the fluctuating workweek calculation may be disallowed and the employer may have to pay his workers the standard method.