In a decision handed down on August 31, the Washington State Supreme Court validated a “broad and flexible” interpretation of state overtime law as it applies to fluctuating workweeks.

In Inniss v. Tandy Corp., the court held that employers may pay overtime in a fluctuating workweek to salaried employees by dividing the total compensation earned in a workweek by hours worked, plus one half time for hours worked over forty in the workweek.

The Washington high court stated that an employer does not violate the law if the pay for all hours worked exceeds the state hourly minimum wage, the employee receives the same amount of pay even if he/she does not work 40 hours in the workweek and provided the employer and employee agree on the calculation in advance.

To clarify, with the salary remaining constant, the “regular rate” will decrease with the more hours that are worked. For example, an employee who agrees in advance to be paid on a fixed salary/fluctuating workweek basis, and whose salary is fixed at $400 a week.

If the employee works 40 hours that week, the “regular rate” is $10 per hour. If the employee works 50 hours, the “regular rate” is $8 per hour, so the employer would add one half time ($4 per hour) to the 10 hours of overtime.

The Washington Supreme Court didn’t have a problem with this approach in the case because 1) the employee agreed to it in advance; 2) the employee is receiving the minimum wage, and; 3) the agreement is fair to the employee because he/she will still get the $400 a week even if he/she works less than 40 hours that week.

In reaching its decision, the court adopted the approach taken by the U.S. Dept. of Labor in regulations interpreting the Fair Labor Standards Act.