By way of background, according to the Fair Labor Standards Act, employers may use the fluctuating workweek method to compensate employees when their regular work schedule varies from week to week. This method permits employers to pay such employees a fixed amount each week as straight-time pay regardless of the number of hours worked, and to pay overtime at half time, rather than at time and one-half, for each hour worked over 40 in a week.
     In O'Brien v. Town of Agawam, the First Circuit Court of Appeals (covering Maine, Massachusetts, New Hampshire and Puerto Rico) ruled that the fluctuating workweek method may not be used when employers pay employees amounts in addition to their normal compensation. Specifically, the Court conditioned the use of the fluctuating workweek method on the following four factors:
     (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.
     In this case, employees were paid night shift differentials, additional pay for every hour worked beyond eight hours a day, and additional pay for every hour worked during off-duty time. The Court held that because supplementary compensation was paid, the employees' salaries were not truly "fixed" as required by the regulations. Therefore, the employer was not entitled to use the fluctuating workweek method.