Under the **Fair Labor Standards Act (FLSA)**, a salaried employee is only exempt from overtime if they satisfy both salary level and duties audits. If an employee receives a salary but **fails the duties audit**, they are considered **Salaried Non-Exempt**.
For salaried non-exempt workers whose work hours fluctuate from week to week, federal law provides a specific calculation method called the **Fluctuating Workweek (FWW)** method (often referred to as **"Chinese Overtime"** or the **Half-Time Method** under **29 CFR ยง 778.114**).
Under FWW, the employer pays a fixed salary which represents straight-time compensation for all hours worked during the week (whether 35 hours or 50 hours). When you work overtime (over 40 hours), you are already compensated at straight-time (1.0x) for those hours through your salary. Therefore, you are only owed the remaining **half-time premium (0.5x)** for the overtime hours.
Step-by-Step Math (Using $800 salary and 50 hours):
1. Calculate Regular Rate: Divide salary by the total hours worked in that week.
• Regular Rate = $800 ÷ 50 hours = **$16.00 per hour**.
2. Calculate Half-Time Premium Rate: Multiply regular rate by 0.5.
• Premium Rate = $16.00 × 0.5 = **$8.00 per hour**.
3. Calculate Overtime Premium Pay: Multiply premium rate by overtime hours.
• Overtime Pay = 10 overtime hours × $8.00 = **$80.00**.
4. Calculate Total Weekly Pay: Add salary to overtime premium pay.
• Total Gross Pay = $800 salary + $80 overtime = **$880.00**.
An employer can only use the half-time method if **all five** of the following strict Department of Labor criteria are met:
1. **Fluctuating Hours:** The employee's actual work hours must vary from week to week (above and below 40).
2. **Fixed Salary:** The salary must remain a fixed amount that does not change regardless of how few hours are worked.
3. **Clear Mutual Agreement:** There must be a clear understanding between employer and employee that the salary pays straight-time for all hours worked.
4. **Minimum Wage Floor:** The salary must be high enough that the regular rate never drops below the federal minimum wage ($7.25/hr).
5. **State Laws:** FWW is banned in some states (including California, Pennsylvania, Alaska, and New Mexico), where overtime must always be paid at full 1.5x regular rates for salaried non-exempt workers.