In the
United States Court of Appeals
For the Seventh Circuit
No. 08-3117
B RENDA U RNIKIS-N EGRO ,
Plaintiff-Appellant,
v.
A MERICAN F AMILY P ROPERTY
S ERVICES, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 06 C 6014—Matthew F. Kennelly, Judge.
A RGUED S EPTEMBER 11, 2009—D ECIDED A UGUST 4, 2010
Before B AUER, R OVNER and W ILLIAMS, Circuit Judges.
R OVNER, Circuit Judge. Although plaintiff Brenda
Urnikis-Negro prevailed in her suit for overtime pay, she
contends on appeal that the district court improperly
calculated the amount of pay she is owed. After a
bench trial, the district court found that defendants
American Family Property Services and its owners and
officers, Todd and Nichole Lash, violated the Fair Labor
2 No. 08-3117
Standards Act of 1938, as amended, 29 U.S.C. §§ 201, et seq.
(“FLSA”), when they mistakenly treated Urnikis-Negro
as an administrative employee who was exempt from
the overtime provisions of the statute. Urnikis-Negro v.
Am. Family Prop. Servs., Inc., No. 06 C 6014, 2008
WL 5539823, at *5-*9 (N.D. Ill. Jul. 21, 2008); see 29 U.S.C.
§§ 207, 216(b). The FLSA sets the standard workweek at
40 hours and requires employers to pay their non-
exempt employees one and one-half times their regular
rate of pay for any hours worked in excess of 40.
§ 207(a)(1). Urnikis-Negro was never paid anything
above her fixed salary for her overtime hours.
However, in calculating Urnikis-Negro’s regular rate
of pay and thence the overtime to which she was entitled,
the court used the fluctuating workweek (“FWW”)
method set forth in 29 C.F.R. § 778.114(a), an interpretive
rule promulgated by the Department of Labor. 2008 WL
5539823, at *11-*12. The FWW method calculates an em-
ployee’s regular rate of pay by dividing her weekly wage
by the total number of hours she works in a given
week rather than by 40. Where, as here, the employee
regularly works more than 40 hours per week, the FWW
method results in both a lower regular rate of pay and a
significantly lower award of overtime pay. The propriety
of relying on section 778.114(a) and the FWW method
in cases where the plaintiff has been miscategorized by
her employer as exempt from the FLSA’s overtime pro-
vision has divided the federal courts.
We agree that section 778.114(a) itself does not pro-
vide the authority for applying the FWW method in a
No. 08-3117 3
misclassification case. That rule sets forth one way in
which an employer may lawfully compensate a nonexempt
employee for fluctuating work hours; it is not a remedial
measure that specifies how damages are to be calculated
when a court finds that an employer has breached its
statutory obligations.
Irrespective of the rule, however, it was appropriate
for the district court to apply the FWW method in this
case. The authority to do so is found in the Supreme
Court’s decision in Overnight Motor Transp. Co. v. Missel,
316 U.S. 572, 62 S. Ct. 1216 (1942), superseded on other
grounds by statute as stated in Trans World Air Lines, Inc. v.
Thurston, 469 U.S. 111, 128 n.22, 105 S. Ct. 613, 625 n.22
(1985), which approved this very method of calculating
of an employee’s regular rate of pay and corresponding
overtime premium. We therefore affirm the district
court’s judgment.
I.
Our summary of the facts is taken largely from the
district court’s own factual determinations. Although we
have not been provided with a complete record of the
testimony and other evidence presented at trial, the
district court’s findings of fact are not challenged in this
appeal; the appeal instead presents a legal question as
to the proper determination of Urnikis-Negro’s regular
rate of pay and the overtime premium to which she
is entitled.
American Family Property Services (“AFPS”) was a
real estate appraisal firm owned by Todd and Nicole
4 No. 08-3117
Lash, who are husband and wife. Real estate appraisers
are licensed by the State of Illinois. Todd Lash became
licensed as an associate appraiser (which required him
to complete specified training and pass a state examina-
tion) in the late 1990s and became a certified appraiser
(which required experience as an associate appraiser,
additional training, and a satisfactory score on an-
other examination) in or about 2000. In 2003, the Lashes
formed the firm Epic Appraisal, which later became
AFPS. Lenders retained AFPS to conduct appraisals of
residential properties on which they were considering
making mortgage loans.
As of early 2004, Todd Lash was the sole certified
appraiser at AFPS, although the firm also contracted with
certified appraisers outside of the firm on occasion. Lash
worked with a number of associate appraisers, some of
whom were employed by AFPS and others of whom
were independent appraisers who worked with AFPS on
a contract basis. Typically, the associate appraisers pre-
pared the appraisal reports for Lash’s review. If and
when Lash approved the report, he forwarded it to the
lender that had retained AFPS to undertake the appraisal.
AFPS hired Urnikis-Negro in July 2004. Urnikis-Negro
was a member of the religious congregation of which
Lash was the pastor. One of her brothers already worked
for AFPS as an associate appraiser, and a second brother
would later join the firm. The firm’s business was
growing, and Lash wanted help in reviewing the
reports prepared by the associate appraisers so that he
could devote less time to AFPS and more time to his
No. 08-3117 5
religious work: “It was my intention at that point to
reduce my role in the company because . . . I wanted to be
a pastor who appraised on the side and not an appraiser
who pastored on the side.” R. 98 at 8. Urnikis-Negro
had no experience in real estate appraisals. At the time
she was hired by AFPS, she had been working as the
office manager of the loan department at LaSalle State
Bank. Lash advised Urnikis-Negro that he would train
her so that she could provide the assistance he sought
in reviewing the appraiser reports. He also offered to
pay for appraiser training so that she could eventually
become an associate appraiser.1
Lash agreed to pay Urnikis-Negro an annual salary of
$52,000. At that time, this was the highest salary paid to
anyone working at AFPS—as high as the salary Lash
himself was paid. It also represented a substantial
increase from the pay Urnikis-Negro had received
during her employment with the bank. As the district
court noted, the substantial pay reflected Lash’s need to
have someone at AFPS who could devote her attention
to the more time-consuming aspects of the work he
had been performing for the firm and thus free up time
for him.
Urnikis-Negro understood that she was to be an em-
ployee of AFPS, and the district court found that this
was an understanding shared by AFPS itself. 2008 WL
5539823, at *2. Nonetheless, when Urnikis-Negro re-
1
During her tenure with the firm, Urnikis-Negro did manage
to earn her associate appraiser’s license.
6 No. 08-3117
ceived her first paycheck from AFPS, she discovered that
the firm had paid her as if she were an independent
contractor, withholding nothing from her pay for
income or Social Security taxes. After she objected, the
firm began making the appropriate withholdings. The
district court found that AFPS’s initial failure to with-
hold taxes was not only contrary to the understanding
between the firm and Urnikis-Negro that she was an
employee but amounted to a deliberate effort to circum-
vent the firm’s legal obligations to withhold taxes from
her pay. Id.
Lash and Urnikis-Negro did not discuss the number of
hours she would be expected to work when he hired her.
Although the district court credited Urnikis-Negro’s
testimony that she expected to work a 40-hour week, id. at
*2, it found that she also understood that her salary was
to cover whatever time she was called upon to work in
a given week. Id. at *12. Her job with the firm was task-
oriented, and her hours were likely to fluctuate with
the volume of the firm’s appraisal business. Yet, Lash
testified at his deposition that all of the firm’s employees
were paid on the basis of a 40-hour week. The district
court found it to be a fair inference from his testimony
that Lash recognized the firm’s obligation to pay a pre-
mium to any employee who was not exempt from the
overtime provisions of the FLSA for any hours worked
in excess of 40 per week. Id. at *2.
After a few weeks of shadowing Lash to become
familiar with what he looked for in reviewing the reports
prepared by associate appraisers, Urnikis-Negro began
No. 08-3117 7
to work without direct supervision. Much of her work
was clerical in nature: she filed appraisal reports, answered
the telephone, called mortgage brokers and lenders to
solicit new business using a list supplied by Lash, and
pursued outstanding balances owed on appraisals AFPS
had completed. She also fielded calls from brokers
and lenders inquiring about the status of pending ap-
praisals, noting errors or deficiencies in reports that the
firm had prepared, or in some instances rejecting an
appraisal outright. In each instance, Urnikis-Negro would
report the call to the appropriate appraiser. More sub-
stantively, Urnikis-Negro reviewed draft reports pre-
pared either by the firm’s associate appraisers or by
outside appraisers with whom the firm had contracted.
Her job was to check the reports for any errors or incon-
sistencies and to ensure that they conformed to the re-
quirements of the lender or broker who had ordered the
appraisal. With respect to this aspect of her work, the
district court found:
Urnikis-Negro’s work in this regard largely consisted
of that of a glorified proofreader. Her responsibility
in reviewing the appraisal reports was to make sure
that all the necessary parts of the report form were
filled in, the form did not contain facially apparent
errors, and it did not have internal inconsistencies. In
addition . . . on some occasions Urnikis-Negro was
responsible for communicating to the appraiser defi-
ciencies that had been noted by the mortgage lender.
These duties, which took up the majority of the time
Urnikis-Negro spent on the job, did not involve the
exercise of discretion or judgment on her part. Rather,
8 No. 08-3117
Urnikis-Negro simply ensured that forms had been
filled out correctly, completely, and without errors.
Any discretion or judgment exercised in connection
with the appraisal forms was exercised by the ap-
praiser, who had ultimate responsibility (both practi-
cally and legally) for everything in the appraisal report.
Id. at *3. The court acknowledged that some of what
Urnikis-Negro did with respect to the firm’s appraisals
involved more than mere proofreading. Beyond making
sure that the reports were complete and accurate, she
was responsible for identifying any problems that might
emerge when a lender reviewed the report. But her obliga-
tion was limited to identifying such potential problems
and communicating them to the appraiser. Id. Similarly,
although Urnikis-Negro occasionally suggested poten-
tial comparable properties that an appraiser might use
to establish the value of the property being appraised, it
was not her responsibility to make these suggestions
and it was the appraiser who decided whether to
accept her suggestion and to determine what comparable
properties to include in the report. Id. at *4.
In sum, neither AFPS nor Todd Lash hired Urnikis-
Negro to exercise judgment or discretion in connection
with appraisals or otherwise. Rather, Lash and the
company expected her, with regard to appraisal
reports, to perform only the essentially ministerial
function of reviewing the completeness and internal
consistency of draft appraisal reports, and to note
for the appraiser areas in which Lash or the lender
might question the report.
No. 08-3117 9
Id. Finally, all reports were reviewed and approved by
a certified appraiser—usually Todd Lash, but in some
instances another individual. Urnikis-Negro was given
the authority to affix the electronic signature of the certi-
fied appraiser once the appraiser approved the report.
But she was only exercising the appraiser’s authority in
performing this task.
Given the large volume of business that the firm was
handling in 2004 and 2005, Urnikis-Negro’s work hours
substantially exceeded 40 per week. Unfortunately, the
parties kept no records of her actual hours, so “[t]he
[c]ourt [was] left to determine by inference and circum-
stantial evidence how many overtime hours Urnikis-
Negro worked.” Id. at *10.2 After weighing the conflicting
testimony of the parties’ witnesses on this point—much
of which the court deemed incredible—the district court
found by a preponderance of the evidence that Urnikis-
Negro worked, on average, 12 hours per day, five days
per week from the time her employment began in
July 2004 through the end of June 2005, and 10 hours per
weekday from July 2005 through December 2005, when
the company’s business slowed. Id. at *11. The court
found further that Urnikis-Negro typically worked an
additional six and one-half hours every other weekend
throughout the period of her employment with AFPS. Id.
2
Reasonable approximations of this sort are appropriate. See
Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88, 66 S. Ct.
1187, 1192 (1946), superseded on other grounds by statute as stated
in IBP, Inc. v. Alvarez, 546 U.S. 21, 41, 126 S. Ct. 514, 527
(2005); Brown v. Family Dollar Stores of Ind., LP, 534 F.3d 593, 595
(7th Cir. 2008); Wirtz v. Turner, 330 F.2d 11, 13 (7th Cir. 1964).
10 No. 08-3117
Those findings led the court to conclude that Urnikis-
Negro worked a total of 1,490.5 hours of overtime over
the course of her employment with AFPS. Specifically:
(1) for the 24 weeks in the period from July 2004 through
June 2005 when Urnikis-Negro worked an extra 6.5 hours
over the weekend, she worked a total of 66.5 hours per
week, which meant that she worked 26.5 hours of over-
time per week, for a total of 636 overtime hours; (2) for
the remaining 25 weeks in that same period, when she
did not work over the weekend, Urnikis-Negro worked
a total of 60 hours per week, meaning that she worked
20 hours of overtime per week, for a total of 500 hours
of overtime; (3) for 14 weeks during the period from
July 2005 through December 2005, as her time began to
drop off, Urnikis-Negro worked 50 hours per week, with
no weekend work, meaning that she worked 10 hours
of overtime per week for a total of 140 hours of overtime;
and (4) for the remaining 13 weeks in that same time
period, when Urnikis-Negro worked another 6.5 hours
over the weekend, for a total of 56.5 hours per week, with
16.5 hours of that sum being overtime work, for a total
of 214.5 overtime hours. See id. at *11, *12. However,
Urnikis-Negro was never paid anything over and above
her regular weekly salary for these overtime hours. (For
her part, Urnikis-Negro never asked for overtime pay
while she was in AFPS’s employ; her desire was to
work fewer hours rather than to make more money.
She testified that she made that known to multiple indi-
viduals at AFPS, but her complaints fell on deaf ears.)
Urnikis-Negro left the employ of AFPS in late Decem-
ber 2005, when she was terminated. By that time, the
No. 08-3117 11
volume of the firm’s business had shrunk consider-
ably (Todd Lash had had his license suspended indefi-
nitely by the Illinois Department of Financial and Profes-
sional Regulation in May 2005) and the firm could no
longer afford her services. She found a new position
with a bank.
Urnikis-Negro subsequently filed suit against AFPS
and the Lashes seeking unpaid overtime compensation
pursuant to the FLSA, see 29 U.S.C. § 216(b), and the
Illinois Minimum Wage Law, 820 ILCS 105/1, et seq.,
along with payment for unused vacation time pursuant
to the Illinois Wage Payment and Collection Act, 820
ILCS 115/1, et seq. The court would later find in favor of
the defendants on the claim for vacation pay, and that
finding is not contested on appeal. As to the claims for
overtime pay, the defendants contended that they owed
no such additional pay to Urnikis-Negro on the
premise that she was “employed in a bona fide . . . admin-
istrative . . . capacity” as defined by the Secretary of
Labor and was therefore exempt from the overtime pro-
visions of the FLSA and the state statute. 29 U.S.C.
§ 213(a)(1); 29 C.F.R. § 541.202; 820 ILCS 105/4a(2)(E).
In view of the evidence presented at trial, the district
court found that AFPS had failed to prove that it
employed Urnikis-Negro in a bona fide administrative
capacity. The pertinent regulation specifies that in order
for a worker to be deemed employed in a bona fide ad-
ministrative capacity, the performance of her primary
duty must demand the exercise of discretion and inde-
pendent judgment on matters of significance. 29 C.F.R.
12 No. 08-3117
§§ 541.200(a)(3), 541.202(a). But Urnikis-Negro did not
exercise discretion and independent judgment in the
performance of her primary duty with AFPS: “[She]
neither made decisions about the firm’s appraisals (or
otherwise) and did not have authority to do so. Rather,
she essentially proofread or checked the work of others
and pointed out possible errors or omissions.” 2008 WL
5539823, at *8. To the extent she made suggestions to
appraisers about possible comparable properties, these
were nothing more than suggestions; the appraisers
themselves had sole control over the contents of their
reports. Id. Thus, although her work related to a core
function of the firm and may have had a substantial
effect on its business, her role was not “administrative”
in the sense defined by the Secretary of Labor. Id. She
was therefore not exempt from the FLSA’s overtime
compensation mandate and was entitled to pay over
and above her weekly salary for the overtime hours
she worked while in AFPS’s employ. Id. at *9. The
court found further that the defendants in failing to
pay Urnikis-Negro overtime had acted in reckless disre-
gard of their obligations and her rights under the FLSA,
a finding of willfulness which enabled her to recover
unpaid overtime for up to three years in advance of the
date she filed suit—enough to cover the entire period of
her employment with AFPS. Id.; see 29 U.S.C. § 255(a).
The FLSA entitles covered employees to overtime
compensation at one and one-half times their regular
hourly pay for any hours in excess of 40 per week.
§ 207(a)(1); 29 C.F.R. § 778.107. On the premise that her
weekly salary of $1,000 was meant to compensate her
No. 08-3117 13
solely for 40 hours of work, Urnikis-Negro contended
that her regular hourly wage was $25.00, and that she
was therefore entitled to overtime compensation at the
rate of $37.50 per hour. However, because the court
found that Urnikis-Negro understood at the time of her
hiring that her fixed salary was intended to cover all of
the hours she worked, even if they exceeded 40 hours
per week, the court instead turned to section 778.114(a)
and the FWW method set forth therein to calculate her
regular hourly rate and overtime premium. As we
discuss in greater detail below, section 778.114(a) recog-
nizes the ability of an employer and an employee
whose weekly hours fluctuate to agree that a fixed
salary amount will serve as the employee’s regular rate
of compensation or “straight-time” pay (i.e., apart from
overtime premiums) for any and all hours the employee
works in a given week, regardless of their number. The
employee’s regular hourly wage will thus vary from
week to week, rising and falling depending on the
number of hours she works in a given week (with the
statutory minimum wage constituting a floor). For any
week in which the employee works more than 40 hours,
the employer will still owe the employee an overtime
premium. But because the fixed salary is meant to
cover the regular rate of pay for all hours worked, the
employer will owe the employee only half of the reg-
ular rate for any hours in excess of 40, rather than time
plus one-half, since by agreement she has already been
paid her regular rate for the overtime hours. See
§ 778.114(a).
Urnikis-Negro had argued in advance of trial that it
would be inappropriate to rely on the FWW method
14 No. 08-3117
in calculating her damages when AFPS had miscate-
gorized her as exempt from the overtime requirements
of the FLSA and had never contemporaneously paid her
any overtime premiums when she worked more than
40 hours in a given week. R. 66, 67. The district court
rejected her arguments in this regard, R. 71; 2008 WL
5539823, at *11, taking its cue from several circuits which
have, largely on the authority of section 778.114(a), applied
the FWW method in cases where the employers have
erroneously treated the plaintiffs as exempt from the
statute’s overtime requirements. The court found it suffi-
cient that “there was a ‘clear mutual understanding
between Urnikis-Negro and Todd Lash that her fixed
salary of $1,000 per week or $52,000 per year was to serve
as her compensation, apart from overtime premiums, for
whatever number of hours she worked each week, rather
than for working 40 hours or some other fixed period.”
2008 WL 5539823, at *12 (citing Valerio v. Putnam Assocs.,
173 F.3d 35, 39-40 (1st Cir. 1999)).
The court thus proceeded to calculate the damages to
which Urnikis-Negro was entitled on the assumption that
her fixed salary had already compensated her at her
regular rate of pay for all of the hours she worked. Al-
though Urnikis-Negro did not work a set schedule and
her hours varied from one week to the next, because there
were no contemporaneous records of the hours that
Urnikis-Negro had worked, the court could not calculate
a regular hourly rate on a week-to-week basis. Instead,
the court calculated a regular hourly rate for each of the
four periods discussed above by dividing her weekly
salary of $1,000 by the average number of hours per week
No. 08-3117 15
she worked in those periods, arriving at hourly rates of:
(1) $15.00 per hour for the 24 weeks in the period from
July 2004 through June 2005 when she worked 66.5 hours
per week; (2) $16.66 per hour for the 25 weeks in that
same period when she worked 60 hours per week;
(3) $20.00 per hour for the 14 weeks in the period from
July 2005 through December 2005 when she worked 50
hours per week; and (4) $17.70 per hour for the 13 weeks
in that same period when she worked 56.5 hours per
week. 2008 WL 5539823, at *12. The court then calculated
the overtime pay due for each of these periods by halving
the regular hourly rate and multiplying it by the number
of overtime hours worked during that period. That calcu-
lation yielded unpaid overtime compensation of: (1) $4,770
for the 24 weeks in July 2004 through June 2005
when Urnikis-Negro worked 66.5 hours per week (.50 x
$15/hour x 26.5 hours weekly overtime x 24 weeks);
(2) $4,165 for the 25 weeks in the same period when she
worked 60 hours per week (.50 x $16.66/hour x 20 hours
weekly overtime x 25 weeks); (3) $1,400 for the 14 weeks
in July 2005 through December 2005 when she worked
50 hours per week (.50 x $20/hour x 10 hours weekly
overtime x 14 weeks); and (4) $1,898 for the 13 weeks in
the same period when she worked 56.5 hours per week (.50
x $17.70/hour x 16.5 hours weekly overtime x 13 weeks).
Id. The total amount of overtime compensation due to
Urnikis-Negro thus came to $12,233. Id.
The court went on to find that Urnikis-Negro was
entitled to liquidated damages in an equal amount. See
29 U.S.C. § 216(b). As the court noted, liquidated dam-
ages are presumptively appropriate for FLSA violations,
16 No. 08-3117
2008 WL 5539823, at *12 (citing Bankston v. Illinois, 60 F.3d
1249, 1254 (7th Cir. 1995)), and the court saw nothing in
the evidence overcoming that presumption. “There is no
indication that the defendants acted reasonably or in
good faith in failing to pay overtime wages; rather, the
defendants recklessly disregarded their obligations
under this statute, just as they sought to flout their ob-
ligations under the income tax withholding and Social
Security laws.” Id. The court therefore awarded Urnikis-
Negro total damages of $24,466 on Count One of her
complaint, which set forth her FLSA claim. Id. The court
entered an identical, cumulative amount on Count Two
of her complaint, which set forth her state-law claim for
overtime.3 It also found that Urnikis-Negro was entitled
to her attorney’s fees and costs, see 29 U.S.C. § 216(b),
which it later determined to be $95,130.71. R. 128; Urnikis-
Negro v. Am. Family Prop. Servs., Inc., No. 06 C 6014, 2009
WL 212122 (N.D. Ill. Jan. 26, 2009).
The district court’s decision to apply the FWW method
substantially reduced the damages awarded to Urnikis-
Negro in two ways. First, by dividing her weekly salary
by the total number of hours she worked in a week
rather than by 40, the FWW method reduced the hourly
wage constituting her regular rate of pay. Second, by
3
The overtime provision of the Illinois Minimum Wage Law,
820 ILCS 105/4a(1), is parallel to that of the FLSA, and Illinois
courts apply the same principles, including the FWW formula,
to the state provision. See Condo v. Sysco Corp., 1 F.3d 599, 601 n.3
(7th Cir. 1993); Haynes v. Tru-Green Corp., 507 N.E.2d 945, 951
(Ill. App. Ct. 1987).
No. 08-3117 17
presuming that the fixed weekly wage paid to Urnikis-
Negro was meant to constitute payment at the regular
rate for all of the hours she worked, including over-
time, it reduced the overtime pay she was owed from
150 percent of the regular rate to just 50 percent of her
regular rate. Had her weekly salary been deemed to
cover a standard 40-hour workweek instead of any and
all hours worked in a given week, her regular rate of pay,
as mentioned, would have been $25 per hour and she
would have received one and one-half times that rate, or
$37.50 per hour, for all hours over 40 per week. Urnikis-
Negro’s total pay for the 1,490.5 overtime hours she
worked would have been $55,893.75, and an award of an
equal sum as liquidated damages would have brought
her total damages to $111,787.50—more than four times
what she actually received. Put another way, use of the
FWW method reduced her total recovery by more than
75 percent.
II.
Section 7(a)(1) of the FLSA sets the maximum regular
workweek at 40 hours and entitles a nonexempt employee
to overtime pay for any hours beyond that number: “no
employer shall employ any of his employees . . . for a
workweek longer than forty hours unless such em-
ployee receives compensation for his employment in
excess of the hours above specified at a rate not less than
one and one-half times the regular rate at which he is
employed.” 29 U.S.C. § 207(a)(1) (emphasis supplied). The
employee’s “regular rate” of pay is thus the “keystone” of
18 No. 08-3117
section 7(a). Walling v. Youngerman-Reynolds Hardwood
Co., 325 U.S. 419, 424, 65 S. Ct. 1242, 1244 (1945). “On
that depends the amount of overtime payments which
are necessary to effectuate the statutory purposes. The
proper determination of that rate is therefore of prime
importance.” Id. at 424, 65 S. Ct. at 1244-45.
For purposes of the overtime calculation, an employee’s
regular rate of pay is the amount of compensation he
receives per hour. 29 C.F.R. § 778.109; see Overnight Motor
Transp. Co. v. Missel, supra, 316 U.S. at 579-80, 62 S. Ct.
at 1221. This does not mean that employers are compelled
to pay their employees by the hour; “[i]t was not
the purpose of Congress in enacting the Fair Labor Stan-
dards Act to impose upon the almost infinite variety
of employment situations a single, rigid form of wage
agreement.” 149 Madison Ave. Corp. v. Asselta, 331 U.S. 199,
203-04, 67 S. Ct. 1178, 1181 (1947) (citing Walling v. A.H.
Belo Corp., 316 U.S. 624, 62 S. Ct. 1223 (1942), superseded on
other grounds by statute as stated in Condo v. Sysco Corp.,
supra, 1 F.3d at 603 n.5), judgment modified on other grounds,
331 U.S. 795, 67 S. Ct. 1726 (1947). Thus, although the
regular rate of pay is expressed in terms of an hourly
wage, employees may, in practice, be paid in a variety
of other ways: “their earnings may be determined on a
piece-rate, salary, commission or other basis, but in
such case the overtime compensation due to employees
must be computed on the basis of the hourly rate derived
therefrom and, therefore, it is necessary to compute
the regular hourly rate of such employees during each
workweek . . . .” § 778.109; see Missel, 316 U.S. at 580, 62
S. Ct. at 1221.
No. 08-3117 19
Urnikis-Negro was a salaried employee. The computa-
tion of her regular rate of pay thus begins with the deter-
mination of her weekly salary. See 29 U.S.C. § 778.113. As
the Supreme Court explained in Missel, “It is . . . abun-
dantly clear from the words of section 7 that the unit of
time under that section within which to distinguish
regular from overtime is the week[:] ‘No employer
shall * * * employ any of his employees * * * (1) for a work-
week longer tha[n] forty-four hours * * *.’ ” 316 U.S. at
579, 62 S. Ct. at 1221 (citation omitted).4 Urnikis-Negro
was hired at an annual salary of $52,000; dividing that
salary by fifty-two (the number of weeks in a year)
yields a weekly salary of $1,000. See § 778.113(b). To
produce the regular hourly rate of pay for purposes of
the overtime calculation, the weekly salary must in turn
be divided “by the number of hours which the salary
is intended to compensate.” § 778.113(a).
Ascertainment of the regular hourly rate of pay would
be a straightforward calculation had Urnikis-Negro been
hired to work a set number of hours per week. To take
the easiest example, had she routinely worked from
9:00 a.m. to 5:00 p.m. five days a week, determining her
regular rate of pay would be a simple matter of dividing
her weekly salary of $1,000 by the 40 hours that salary
was meant to compensate, yielding an hourly salary of
$25.00. See § 778.113(a). Any hours she worked in excess
4
As originally enacted, section 7(a) of the FLSA set the maxi-
mum regular workweek at 44 hours for the first year following
the statute’s effective date, 42 hours for the following year,
and 40 hours thereafter. See 52 Stat. 1060, 1063 (June 25, 1938).
20 No. 08-3117
of 40 would then be compensated at one and one-half
times that hourly rate, or $37.50. See id.
But Urnikis-Negro was not hired to work a fixed
number of hours per week. Although the district court
found it likely that Urnikis-Negro when hired believed
she would be working a 40-hour week, as she had for the
bank, in fact she routinely worked many hours in excess
of 40 per week throughout the period of her employ-
ment with AFPS; and the court found further that her
salary was intended to compensate her for whatever
hours she happened to work. Thus, although her
weekly pay was fixed, her weekly hours were indeter-
minate and routinely exceeded the standard workweek
of 40 hours. In view of the Supreme Court’s decision in
Missel, this arrangement has an impact on both the cal-
culation of her regular rate of pay and the amount of
overtime pay to which she is entitled.
The Court in Missel held that when an employee is, by
agreement, paid a fixed weekly wage for hours that
fluctuate from week to week, the proper way to
calculate the employee’s regular rate of pay is to divide
the weekly wage by the number of hours actually worked
in a particular week.
No problem is presented in assimilating the computa-
tion of overtime for employees under contract for a
fixed weekly wage for regular contract hours which
are the actual hours worked, to similar computations
for employees on hourly rates. Where the employ-
ment contract is for a weekly wage with variable or
No. 08-3117 21
fluctuating hours the same method of computation
produces the regular rate for each week. As that rate
is on an hourly basis, it is regular in the statutory
sense inasmuch as the rate per hour does not vary for
the entire week, though week by week the regular
rate varies with the number of hours worked. It is true
that the longer the hours the less the rate and the
pay per hour. This is not an argument, however,
against this method of determining the regular of
employment for the week in question. Apart from
the Act if there is a fixed weekly wage regardless of
the length of the workweek, the longer the hours the
less are the earnings per hour. This method of compu-
tation has been approved by each circuit court of
appeals which has considered such problems. See
Warren-Bradshaw Drilling Co. v. Hall, 5 Cir., 124 F.2d
42, 44; Bumpus v. Continental Baking Co., 6 Cir., 124
F.2d 549, 552, cf. Carleton Screw Products Co. v.
Fleming, 8 Cir., 126 F.2d 537, 541. It is this quotient
which is the “regular rate at which an employee is
employed” under contracts of the types described and
applied in this paragraph for fixed weekly compensa-
tion for hours, certain or variable.
316 U.S. at 580, 62 S. Ct. at 1221 (footnotes omitted).
As they have some bearing on this case, a few additional
details about Missel are worth summarizing. Missel
worked as a rate clerk for a trucking company. In lieu of
an hourly wage, Missel was paid a fixed weekly sum for
hours that fluctuated widely from day to day but
averaged (during the period for which records were
22 No. 08-3117
available) 65 hours per week and in some weeks totaled as
many as 75 or 80 hours. Despite the long hours, his em-
ployer never paid him anything additional for his over-
time, on the theory that Missel’s weekly compensation
was sufficient to pay him the statutory minimum wage
(which was 25 cents an hour during the first effective year
of the FLSA, see 52 Stat. 1060, 1062 (June 25, 1938)) plus
one and one-half times that rate for all of the overtime
hours he actually worked. Effectively, the employer
was asserting that Missel’s regular rate of pay, by default,
was the statutory minimum wage. The district court
adopted that same theory in rejecting Missel’s suit for
overtime pay. 40 F. Supp. 174, 180 (D. Md. 1941). But the
Supreme Court rejected that rationale, pointing out that
there was nothing in the (unwritten) agreement between
Missel and his employer limiting the number of hours
he could be made to work and no provision to pay him
more in the event he worked so many hours that the
weekly wage proved insufficient to compensate him
even at the statutory minimum wage (plus one and one-
half times that wage for overtime). 316 U.S. at 581, 62 S. Ct.
at 1222. The Court was thus unwilling to presume that
Missel’s regular rate of pay was equal to the statutory
minimum wage simply because, in hindsight, using that
rate meant that Missel had already received both the
regular and overtime pay to which he was entitled.
“Implication cannot mend a contract so deficient in
complying with the law.” Ibid. Instead, in the absence
of any contractual provision for overtime, the court
presumed that Missel’s fixed weekly wage was meant
to compensate him only at the regular rate for the hours
No. 08-3117 23
that he worked, exclusive of any overtime premium. Id.
at 580, 62 S. Ct. at 1221. Taking this approach meant
that Missel’s regular rate of pay would be higher than
the minimum wage and that his employer would owe
him additional pay (and at a higher rate) for the many
overtime hours he had worked. That result was con-
sistent with what the Court cited as one of the purposes
of the FLSA, which was to exert pressure on employers
to shorten the workweek and spread work among a
greater number of employees by requiring employers to
pay a premium for overtime work. Id. at 577-78, 62 S. Ct. at
1220.
Notably, the approach taken by the Court in Missel
treats the fixed weekly wage paid to the employee as
compensation at the regular rate for all hours that the
employee works in a week, including overtime hours. The
employer will separately owe the employee a premium
for the overtime hours, but because he has already
been compensated at the regular rate for the overtime
hours by means of the fixed wage, the employer will owe
him only one-half of the regular rate for those hours
rather than time plus one-half. As Missel itself also recog-
nizes, the employee’s regular rate of pay will vary de-
pending on the number of hours he works in a given
week; the greater the number of hours he works, the
lesser will be his regular, hourly rate of pay. And the
overtime premium that the employer owes his em-
ployee for any hours worked above 40 will rise or fall
along with the total number of hours worked in a week
and the resulting regular rate of pay.
24 No. 08-3117
Missel’s method of determining the regular rate of pay
for an employee whose work hours fluctuate but who
is paid a fixed salary for whatever hours he works has
since been incorporated into an interpretive rule promul-
gated by the Department of Labor. See 29 C.F.R. § 778.114.
It is among a number of rules comprising a broader
interpretive bulletin issued in 1968 that memorializes the
Department of Labor’s understanding of the meaning and
application of the maximum hours and overtime pay
requirements of the FLSA. 33 Fed. Reg. 986 (Jan. 23, 1968);
see 29 U.S.C. § 778.1 The bulletin was not issued pursuant
to the usual notice and rulemaking procedures used with
formal regulations. 33 Fed. Reg. 986; see Mayhew v. Wells,
125 F.3d 216, 218 (4th Cir. 1997); Desmond v. PNGI Charles
Town Gaming, LLC, 661 F. Supp. 2d 573, 579 n.2 (N.D. W.
Va. 2009); In re Texas EZPawn Fair Labor Standards Act
Litigation, 633 F. Supp. 2d 395, 399, 402 (W.D. Tex. 2008).
However, as the bulletin reflects the DOL’s official under-
standing of the FLSA’s requirements, it is nonetheless
entitled to a “measure of respect” from the judiciary.
Fed. Express Corp. v. Holowecki, 552 U.S. 389, 390, 128 S. Ct.
1147, 1156 (2008) (quoting Alaska Dep’t of Environmental
Conservation v. EPA, 540 U.S. 461, 488, 124 S. Ct. 983, 1001
(2004)); Skidmore v. Swift & Co., 323 U.S. 134, 139-140, 65
S. Ct. 161, 164 (1944); Missel, 316 U.S. at 580 n.17, 62 S. Ct.
at 1221-22 n.17; see U.S. Freightways Corp. v. C.I.R., 270
F.3d 1137, 1141 (7th Cir. 2001) (courts give full deference
under Chevron U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 104 S. Ct. 2778 (1984), only
to those regulations issued with full notice and opportu-
No. 08-3117 25
nity for comment or like formalities; more informal state-
ments of position “receive a more flexible respect”).
We have specifically sustained section 778.114 as a rea-
sonable construction of the FLSA’s overtime require-
ments. Condo, 1 F.3d at 605. And as our discussion will
make clear, our reservation is not with the Department of
Labor’s interpretive rule, but rather with judicial ap-
plication of that rule to misclassification cases in which
the rule’s prerequisites are not met.
Section 778.114 explains how and under what circum-
stances an employer may compensate an employee
using the FWW method:
(a) An employee employed on a salary basis may
have hours of work which fluctuate from week to week
and the salary may be paid [to] him pursuant to an
understanding with his employer that he will receive
such fixed amount as straight time pay for whatever
hours he is called upon to work in a workweek,
whether few or many. Where there is a clear mutual
understanding of the parties that the fixed salary is
compensation (apart from overtime premiums) for the
hours worked each workweek, whatever their number,
rather than for working 40 hours or some other fixed
weekly work period, such a salary arrangement is
permitted by the [FLSA] if the amount of the salary is
sufficient to provide compensation to the employee
at a rate not less than the applicable minimum wage
rate for every hour worked in those workweeks in
which the number of hours he works is greatest, and if
he receives extra compensation, in addition to such
26 No. 08-3117
salary, for all overtime hours worked at a rate not
less than one-half his regular rate of pay. Since the
salary in such a situation is intended to compensate
the employee at straight time rates for whatever
hours are worked in the workweek, the regular rate
of the employee will vary from week to week and is
determined by dividing the number of hours worked
in the workweek into the amount of the salary to
obtain the applicable hourly rate for the week. Pay-
ment for overtime hours at one-half such rate in
addition to the salary satisfies the overtime pay re-
quirement because such hours have already been
compensated at the straight time regular rate, under
the salary arrangement.
(b) The application of the principles above stated
may be illustrated by the case of an employee whose
hours of work do not customarily follow a regular
schedule but vary from week to week, whose over-
time work is never in excess of 50 hours in a work-
week, and whose salary of $250 a week is paid with
the understanding that it constitutes his compensa-
tion, except for overtime premiums, for whatever
hours are worked in the workweek. If during the
course of 4 weeks this employee works 40, 44, 50, and
48 hours, his regular hourly rate of pay in each of these
weeks is approximately $6.25, $5.68, $5, and $5.21,
respectively. Since the employee has already received
straight-time compensation on a salary basis for
all hours worked, only additional half-time pay is
due. For the first week the employee is entitled to be
No. 08-3117 27
paid $250; for the second week $261.36 ($250 plus
4 hours at $2.84, or 40 hours at $5.68 plus 4 hours at
$8.52); for the third week $275 ($250 plus 10 hours at
$2.50, or 40 hours at $5 plus 10 hours at $7.50); for the
fourth week approximately $270.88 ($250 plus 8
hours at $2.61 or 40 hours at $5.21 plus 8 hours
at $7.82).
(c) The “fluctuating workweek” method of overtime
payment may not be used unless the salary is suffi-
ciently large to assure that no workweek will be
worked in which the employee’s average hourly
earnings from the salary fall below the minimum
hourly wage rate applicable under the Act, and unless
the employee clearly understands that the salary
covers whatever hours the job may demand in a
particular workweek and the employer pays the
salary even though the workweek is one in which a
full schedule of hours is not worked. Typically,
such salaries are paid to employees who do not cus-
tomarily work a regular schedule of hours and are
in amounts agreed on by the parties as adequate
straight-time compensation for long workweeks
as well as short ones, under the circumstances of
the employment as a whole. Where all the legal pre-
requisites for use of the “fluctuating workweek”
method of overtime payment are present, the Act, in
requiring that “not less than” the prescribed premium
of 50 percent for overtime hours worked be paid,
does not prohibit paying more. On the other hand,
where all the facts indicate that an employee is
being paid for his overtime hours at a rate no greater
than that which he receives for nonovertime hours,
28 No. 08-3117
compliance with the Act cannot be rested on any
application of the fluctuating workweek overtime
formula.
§ 778.114.5
Several aspects of this interpretive rule bear men-
tioning. First, the rule is forward looking. It describes a
manner in which an employer may compensate a non-
exempt employee by means of a fixed wage for variable
work hours and still comply with the overtime obliga-
tion imposed by the FLSA. Second, the rule requires
both a “clear mutual understanding” between the em-
5
Although section 778.114 in its current form dates to 1968, the
Department of Labor’s Wage & Hour Division has, since the
earliest days of the FLSA, taken the position that when an
employer and its employee have agreed that the employee
will be paid a fixed salary for work hours that fluctuate
from week to week, his regular rate of pay should be deter-
mined by dividing the fixed wage by the hours worked in a
particular week, and the employee will be owed a premium of
50 percent of that rate for any overtime hours. See Interpretative
Bulletin No. 4 ¶¶ 10, 12 (Oct. 21, 1938, as revised Novem-
ber 1940), 1941 Wage & Hour Man. (BNA) 127, 128-29. The
Supreme Court noted as much in Missel, 316 U.S. at 580 n.17, 62
S. Ct. at 1221-22 n.17, adding that “[w]hile the interpretative
bulletins are not issued as regulations under statutory auth-
ority, they do carry persuasiveness as an expression of the
view of those experienced in the administration of the Act
and acting with the advice of a staff specializing in its interpreta-
tion and application.” See also Walling v. A.H. Belo Corp.,
supra, 316 U.S. at 631 n.7, 62 S. Ct. at 1227 n.7.
No. 08-3117 29
ployer and employee that the fixed wage will constitute
the employee’s regular or straight-time pay for any and
all hours worked in a given week and the separate pay-
ment of an overtime premium for any hours in excess of
40 that are worked in that week. § 778.114(a). Third, the
rule on its face is not a remedial measure. It says nothing
about how a court is to calculate damages where, as here,
the employer has breached its obligation to pay the em-
ployee an overtime premium. Its focus instead is on
how an employer may comply with its statutory obliga-
tions in the first instance and avoid liability for breach
of those obligations.
Despite the nonremedial nature of the rule, a number
of courts—both appellate and district—have relied on
section 778.114(a) in fashioning relief for cases in which
an employee receiving a fixed wage has been misclassi-
fied as exempt from the overtime mandate of the FLSA
and thus has not received overtime pay. See Clements v.
Serco, Inc., 530 F.3d 1224, 1230-31 (10th Cir. 2008); Valerio
v. Putnam Assocs., supra, 173 F.3d at 39-40; Blackmon v.
Brookshire Grocery Co., 835 F.2d 1135, 1138-39 (5th Cir. 1988);
see also, e.g., Desmond v. PNGI Charles Town Gaming, LLC,
supra, 661 F. Supp. 2d at 578-85; Torres v. Bacardi Global
Brands Promotions, Inc., 482 F. Supp. 2d 1379, 1380-82 (S.D.
Fla. 2007); Perez v. RadioShack Corp., No. 02 C 7884, 11 Wage
& Hour Cas. 2d (BNA) 163, 2005 WL 3750320, at *6-*8 (N.D.
Ill. Dec. 14, 2005); Tumulty v. FedEx Ground Package Sys.,
Inc., No. C04-1425P, 2005 WL 1979104, at *4-*5 (W.D. Va.
Aug. 16, 2005); Saizan v. Delta Concrete Prods. Co., 209
F. Supp. 2d 639, 640-41 (M.D. La. 2002); Donihoo v. Dallas
Airmotive, Inc., No. Civ. A. 3:97-CV-0109P, 1998 WL
30 No. 08-3117
47632, at *6 (N.D. Tex. Feb. 2, 1998). As the district court
did here, these courts typically have relied on proof of a
clear mutual understanding between the employer and
the employee that the employee’s fixed salary was meant
to compensate him for any and all hours that the em-
ployee worked to place the case within the FWW frame-
work. Although the employee, as a result of the misclassi-
fication, has never been paid an overtime premium, courts
fill in that piece of the FWW formula by making the
premium part of the damages award. The employee’s
regular rate of pay is determined by the total hours
worked in a week into his fixed weekly wage, and he is
awarded a premium of one-half of that rate for the over-
time hours he worked in that week. See, e.g., Clements, 530
F.3d at 1230-31; Valerio, 173 F.3d at 39-40; Blackmon,
835 F.2d at 1138-39.
The fit between section 778.114(a) and the misclassi-
fied employee is an imperfect one, to be sure, for reasons
we have already touched upon. Besides looking forward
rather than backward, the interpretive rule plainly envi-
sions the employee’s contemporaneous receipt of a pre-
mium apart from his fixed wage for any overtime work
he has performed. The rule expressly requires both “a
clear mutual understanding [between] the parties that
the fixed salary is compensation (apart from overtime
premiums) for the hours worked each workweek, whatever
their number” and that the employee “receive[ ] extra
compensation, in addition to such salary for all overtime hours
worked at a rate not less than one-half his regular rate of pay.”
§ 778.114(a) (emphasis ours). See Condo, 1 F.3d at 601; see
also 29 C.F.R. § 778.106 (“The general rule is that overtime
No. 08-3117 31
compensation earned in a particular workweek must be
paid on the regular pay day for the period in which such
workweek ends.”); see also Rainey v. Am. Forest & Paper
Ass’n, 26 F. Supp. 2d 82, 100-01 (D.D.C. 1998) (coll.
cases in which judicial use of FWW method deemed ap-
propriate because overtime premium was paid contem-
poraneously to employee), disagreed with on other grounds
by A.I. Credit Corp. v. Legion Ins. Co., 265 F.3d 630, 637 (7th
Cir. 2001).6 Plainly the employee has not received such
extra compensation when, as was true in this case, her
employer has misclassified her as exempt from the
FLSA’s overtime requirements and has never separately
paid her for overtime. See Monahan v. Emerald Performance
Mat’ls, LLC, — F. Supp. 2d —, 2010 WL 724031, at *9 (W.D.
Wash. Feb. 25, 2010) (resolving state law claim with refer-
ence to federal law); Russell v. Wells Fargo & Co., 672
F. Supp. 2d 1008, 1013-14 (N.D. Cal. 2009); Brown v. Nipper
Auto Parts & Supplies, Inc., No. Civ. A. 7:08CV00521, 156
Lab. Cas. ¶ 35,579, 2009 WL 1437836, at *7 (W.D. Va. May
21, 2009); Texas EZPawn, supra, 633 F. Supp. 2d at 401;
Scott v. OTS Inc., No. Civ. A. 1:02CV1950-AJB, 11 Wage &
6
In 2008, the Department of Labor’s Wage & Hour Division
issued a notice of proposed rulemaking which, in relevant part,
proposed to modify section 774.118(a) by deleting the phrase
“apart from overtime premiums” from the language describing
the clear mutual understanding between the employer and
employee that the latter’s salary will serve as compensation
for whatever hours he works in a given week. 73 Fed. Reg.
43654, at 43669-70 (Jul. 28, 2008). The proposed modification
was not adopted, however.
32 No. 08-3117
Hour Cas. 2d (BNA) 1714, 2006 WL 870369, at *13 (N.D. Ga.
Mar. 31, 2006); Cowan v. Treetop Enters., Inc., 163 F. Supp. 2d
930, 941 (M.D. Tenn. 2001); Rainey, 26 F. Supp. 2d at 100-01;
see also Hunter v. Sprint Corp., 453 F. Supp. 2d 44, 59-60
(D.D.C. 2006); Rushing v. Shelby County Gov’t, 8 F. Supp. 2d
737, 745 (W.D. Tenn. 1997). Subsection (c) of the rule
reinforces this point, cautioning that “where all the facts
indicate an employee is being paid for his overtime hours
at a rate no greater than that which he receives for
nonovertime hours, compliance with the Act cannot be
rested on any application of the fluctuating workweek
overtime formula.” Section 778.114(a) is thus a dubious
source of authority for calculating a misclassified em-
ployee’s damages in the way that the district court did
here. A number of district courts, noting that the rule’s
requirements invariably have not been satisfied in
employee-misclassification cases, have thus rejected reli-
ance on the rule in calculating an employee’s regular rate
of pay. See Monahan, 2010 WL 724031, at *7-*9; Brown, 2009
WL 1437836, at *6-*7; Russell, 672 F. Supp. 2d 1008; Texas
EZPawn, 633 F. Supp. 2d at 400-06; Scott, 2006 WL 870369,
at *11-*13; Cowan, 163 F. Supp. 2d at 940-42; Rainey, 26
F. Supp. 2d at 100-02. We find the reasoning of these
cases to be persuasive.
But finding that section 778.114(a) itself is inapplicable
does not compel the conclusion that reliance on the FWW
method of calculating Urnikis-Negro’s regular rate of pay
was erroneous. Setting the Department of Labor’s rule
aside, a court still must ascertain the employee’s reg-
ular rate of pay and calculate an appropriate overtime
No. 08-3117 33
premium based on that rate. Where the employee was
paid a fixed weekly salary, this requires first determining
the number of hours that salary was intended to compen-
sate. A number of courts that have deemed section
778.114 inapplicable have reasoned that if the require-
ments of the rule are not met, one should presume that an
employee’s fixed weekly salary was meant to compensate
him solely for 40 hours of work even when he regularly
worked more than 40 hours without any expectation of
additional pay. E.g., Monahan, 2010 WL 724031, at *8; Texas
EZPawn, 633 F. Supp. 2d at 397, 404-05; Rainey, 26 F. Supp.
2d at 85, 102. Employing that presumption would lead
to the conclusion that the employee has received no pay
at all for his overtime (i.e., neither straight-time pay nor
an overtime premium) and is thus entitled to one and one-
half his regular rate of pay for all overtime hours. It
would also boost his regular rate of pay, as his fixed
weekly wage would be divided by 40 rather than the
(higher) total number of hours he worked during the
week. Texas EZPawn, 633 F. Supp. 2d at 404.
Assuming without deciding that it might be appro-
priate to presume that a misclassified employee’s fixed
salary was meant to compensate him solely for 40 hours,
the presumption cannot be irrebuttable. The employee’s
regular rate of pay is a factual matter, Walling v.
Youngerman-Reynolds Hardwood Co., supra, 325 U.S. at 424-
25, 65 S. Ct. at 1245, and where the employer and the
employee have in fact agreed that a fixed weekly salary
will constitute payment at the regular rate for any and all
hours worked—which Missel recognizes they are free to
34 No. 08-3117
do, see 316 U.S. at 580, 62 S. Ct. at 12217 —there is no
factual basis for deeming the salary to constitute straight-
time compensation for 40 hours alone. True, the employer
in this scenario, and perhaps the employee as well, have
failed to recognize the employee’s entitlement to a pre-
mium for overtime hours. In that respect, the agreement
runs afoul of the FLSA. But that breach of the statute
does not alter the employee’s regular rate of pay, which
under Missel turns on what the parties agreed the em-
ployee would be paid for the hours he actually worked
(so long as the rate is not lower than the minimum wage).
The overtime premium can and will be awarded by the
court retroactively. See Paul Decamp & Jacqueline C. Tully,
Half-Time or Time and A-Half? Calculating Overtime in
Misclassification Cases, 278 Fair Lab. Stds. Handbook for
States, Local Gov’t & Sch. Newsl. 3 (Nov. 2008) (proper
focus in calculating regular rate of pay for misclassified
employee is on whether parties intended fixed salary
to compensate employee for all hours worked in work-
week or solely for first 40 hours).
The evidence in this case was mixed as to the number of
hours Urnikis-Negro’s fixed weekly salary was meant
to compensate. Urnikis-Negro testified that she expected,
7
See also Walling, 325 U.S. at 424, 65 S. Ct. at 1245 (“As long as
the minimum hourly rates established by Section 6 are re-
spected, the employer and employee are free to establish th[e]
regular rate at any point and in any manner they see fit. They
may agree to pay compensation according to any time or
work measurement they desire.”).
No. 08-3117 35
at the time of her hiring, to be working 40 hours per
week and that Lash had offered her the job at $1,000 per
week for hours similar to those she had been working at
the bank, which amounted to 40 per week. R. 97 at 35, 53,
64. Lash himself testified that all AFPS employees were
paid based on a 40-hour week. R. 98 at 80 (quoting R. 42-5
at 30). Yet, it is undisputed that Urnikis-Negro routinely
worked substantially more than 40 hours per week
throughout her tenure with AFPS and was never paid
anything apart from her fixed weekly wage of $1,000. In
weighing the evidence, the district court found that
although Urnikis-Negro likely thought she would be
working 40-hour weeks, “her understanding was that her
salary was to cover whatever time she was called upon to
work in a given week.” 2008 WL 5539823, at *2. The court
found further that it was “less than crystal clear what
[Lash] meant” when he said that all salaries at AFPS
were based on a 40-hour week; in the court’s view, it was
a fair inference that Lash was simply acknowledging
the company’s obligation to pay overtime to any em-
ployees who worked more than 40 hours and were not
exempt from the statute’s overtime requirement. Id.
Ultimately, the court determined that Urnikis-Negro
and the defendants had a “clear mutual understanding”
that her weekly salary of $1,000 was meant to compen-
sate her for however many hours she worked, not 40 or
some other number. Id. at *12. This was a finding of fact
and it was not clearly erroneous. It is true that the court
made this finding in the context of applying section
778.114(a), which as we have discussed is not a remedial
rule and thus does not supply the proper analytical
36 No. 08-3117
framework for a determination of damages once an
employer has been found to have breached its obliga-
tion to pay overtime under the FLSA. Nonetheless, the
court’s finding addresses the very question that is the
starting point for determining Urnikis-Negro’s regular
rate of pay: For what number of hours was her
fixed weekly wage intended to compensate her? The
court here unequivocally determined that Urnikis-
Negro’s wage was intended to compensate her not
for 40 hours per week or some other fixed number of
hours, but for any and all hours that she worked in a
given week.8
Given this finding, it is Missel which dictates how the
regular rate of pay must be calculated here. See Martin
v. Tango’s Rest., Inc., 969 F.2d 1319, 1324 (1st Cir. 1992)
(“[Missel’s] outcome is binding on us and the district
judge . . . .”); Rushing v. Shelby County Gov’t, supra, 8 F.
Supp. 2d at 745 (“[t]his is not a proper case for application
of the fluctuating workweek provision [section 778.114,]”
as the parties’ agreement did not include understanding
8
We note that the agreement that an employee is to be paid a
fixed salary for whatever hours she worked need not be evi-
denced in writing. Griffin v. Wake County, 142 F.3d 712, 716 (4th
Cir. 1998) (citing Bailey v. County of Georgetown, 94 F.3d 152,
156 (4th Cir. 1996)). The existence of such an agreement
instead may be inferred from the parties’ conduct. See Mayhew
v. Wells, supra, 125 F.3d at 219 (citing Monahan v. County of
Chesterfield, Va., 95 F.3d 1263, 1281 n.21 (4th Cir. 1996)); see also,
e.g., Clements v. Serco, Inc., supra, 530 F.3d at 1231; Valerio v.
Putnam Assocs., supra, 173 F.3d at 39-40.
No. 08-3117 37
that plaintiffs were entitled to overtime pay; calculation
of overtime premium was instead governed by Missel);
Zoltek v. Safelite Glass Corp., 884 F. Supp. 283, 287 (N.D. Ill.
1995) (“Because the parties agreed that Zoltek was to be
compensated on a salaried basis, with no additional
payment for overtime hours, the calculation of his ‘regular
rate’ is governed by the formula described in [Missel].”).
Urnikis-Negro, like Missel, was paid a fixed weekly
sum for any and all hours that she worked. Like Missel,
she routinely worked substantial amounts of overtime.
And like Missel, she never received any premium for
the overtime hours she worked. The Supreme Court held
that in this situation, the employee’s regular rate of pay
for a given week is calculated by dividing the fixed weekly
wage by the total number of hours worked in that week.
316 U.S. at 580, 62 S. Ct. at 1221. The employee is then
entitled to an overtime premium of one-half of that rate.
See ibid. & n.16; Walling, 316 U.S. at 634, 62 S. Ct. at 1228
(discussing calculation of regular and overtime rates of
pay under Missel). As we have noted, this method of
calculating an employee’s regular rate of pay and the
overtime premium has been incorporated into section
778.114, which is why the result of applying that rule
is correct even if, analytically, the rule itself is inapt.
Indeed, the approach pre-dates the Supreme Court’s
decision in Missel, which noted that it already had been
adopted by every circuit court of appeals to address the
subject. 316 U.S. at 580, 62 S. Ct. at 1221 (coll. cases); see
Warren-Bradshaw Drilling Co. v. Hall, 124 F.2d 42, 44 (5th
Cir. 1941) (cited in Missel) (“What the statute in effect
provides, and what this court has held, is: That overtime
38 No. 08-3117
must be compensated for at one and one-half times the
regular rate at which the wage earner is employed; that
that rate may be fixed by agreement; and that if there is
no agreement fixing the amount to be paid for regular
and overtime work, the regular rate, as to it, may
properly be determined by dividing the total pay each
week by the total hours worked.”), judgment aff’d, 317
U.S. 88, 63 S. Ct. 125 (1942); Bumpus v. Continental Baking
Co., 124 F.2d 549, 553 (6th Cir. 1941) (cited in Missel)
(calculating employee’s regular rate by dividing fixed
weekly wage by the 48 hours per week it was intended
to compensate, and further holding that “[f]or each over-
time hour for which appellant received his regular rate
he is entitled only to additional half-time pay”), cert. denied,
316 U.S. 704, 62 S. Ct. 1305 (1942); see also Missel v. Over-
night Motor Transp. Co., 126 F.2d 98, 110 (4th Cir. 1942)
(coll. district court and state cases applying same ap-
proach), judgment aff’d, 316 U.S. 572, 62 S. Ct. 1216.
Indeed, it is worth noting that in Missel, the Fourth
Circuit explicitly rejected the use of the statutory maxi-
mum workweek as the basis for calculating the em-
ployer’s regular rate of pay. The plaintiff had suggested
using the statutory maximum (then 42 or 44 hours per
week) as a divisor instead of the total hours worked
in a week. 126 F.2d at 101. But the court found “[n]o
authority” for that method of calculating his regular rate
of compensation and rejected it on that basis. Id. at 102
n.3. And the Supreme Court, as we have discussed, held
that it was appropriate to divide the plaintiff’s fixed
weekly wage by the total hours worked rather than by
No. 08-3117 39
some other number. See Martin, 969 F.2d at 1324; Rushing,
8 F. Supp. 2d at 745; Zoltek, 884 F. Supp. at 287-88.9
9
As we have noted, the Wage & Hour Division of the Depart-
ment of Labor itself took the same approach to determining
an employee’s regular rate of pay prior to the Supreme Court’s
decision in Missel. See n.5, supra. In recent years, the Division
has also issued two opinion letters supporting the retroactive
payment of overtime pursuant to the FWW formula. A 1996
letter answered “yes” to the question whether the Division’s
coefficient table for calculating overtime premiums of 50
percent could be used to retroactively determine the amount of
overtime due to an employee who was never paid overtime
in the first instance. Wage & Hour Div., U.S. Dep’t of Labor,
Opinion Letter—FLSA, 1996 WL 1005216 (July 15, 1996). But
because the letter reveals little about the circumstances under-
lying the inquiry and the Division’s reasons for answering in
the affirmative, it carries little if any persuasive weight. See
Hunter, 453 F. Supp. 2d at 59-60 n.18. More recently, in a much
more detailed letter, the Division agreed that an employer
could properly use the FWW method to retroactively calculate
the overtime owed to a salaried employee who regularly
worked in excess of 40 hours per week, but whom the em-
ployer only belatedly realized was not exempt from the over-
time mandate of the FLSA. See Wage & Hour Div., U.S. Dep’t of
Labor, Retroactive payment of overtime and the fluctuating
workweek method of payment, Opinion Letter FLSA 2009-3 (Jan. 14,
2009). Citing the Tenth Circuit’s decision in Clements and the
First Circuit’s decision in Valerio, the letter found it sufficient
that the parties had a clear mutual understanding that the
fixed salary was meant to compensate the employee for what-
ever number of hours he worked in a week. The detail of this
(continued...)
40 No. 08-3117
As Urnikis-Negro points out, there are ways in which
calculating her regular rate of pay in this manner works
to the defendants’ benefit. As we noted in summarizing
the district court’s holding, dividing Urnikis-Negro’s
weekly salary by the total hours she worked in a week,
rather than by 40, results in a significantly lower hourly
rate, as Urnikis-Negro routinely worked substantially
more than 40 hours per week. And by treating her over-
time hours as already having been compensated at the
regular rate of pay, such that she is owed only the 50-
percent overtime premium, this method substantially
reduces the amount of overtime pay to which she is
now entitled. Consider the following table reflecting
the calculation of the regular rate of pay and the corre-
sponding overtime premium using the FWW method
for an employee who, like Urnikis-Negro, is paid a fixed
salary of $1,000 per week:
9
(...continued)
second letter imbues it with somewhat more persuasive force
than the first, but it adds nothing beyond the points that the
courts analyzing this issue have already made.
No. 08-3117 41
Calculation of Overtime Using FWW Method
Weekly Regular O/T Pre- O/T Total
Hours Rate 1 0 mium Hours Pay
40 hours $25.00/ $12.50/ 0 $1,000
hour hour
50 hours $20.00/ $10.00/ 10 $1,100
hour hour
60 hours $16.67/ $8.33/ 20 $1,166
hour hour
80 hours $12.50/ $6.25/ 40 $1,250
hour hour
100 hours $10.00/ $5.00/ 60 $1,300
hour hour
What the table makes clear is that the employee’s hourly
rate of pay is inversely proportional to how hard she
works. For a workweek equaling the statutory maximum
of 40 hours, the employer is compensated at the rate of
$25.00 per hour. For a workweek twice that long, her
regular hourly rate is one-half that much—$12.50 per
hour—and her overtime premium is likewise one-
half of what it would be based on a 40-hour workweek.
In effect, comparing the two rates of pay, the em-
10
We note that the each of the regular rates of pay set forth
in this table is above the federal minimum wage, which cur-
rently is $7.25 per hour.
42 No. 08-3117
ployee who works an 80-hour week is not receiving time
and a-half for her overtime hours, but half-time
($18.75 total compensation per overtime hour versus
$37.50).
At the same time, because the employer is made to pay
the misclassified employee an overtime premium no
greater than it would have paid had it complied with
section 778.114(a) in the first instance, the employer
receives the benefit of the rule without having ever
paid the employee contemporaneously for her overtime
work. By contrast, calculating the worker’s regular rate
of pay on the basis of a 40-hour week rather than the
FWW method would boost the worker’s damages
and penalize the employer more severely for having
misclassified her. Urnikis-Negro argues that use of the
more employer-friendly FWW method gives employers
an incentive to misclassify employees as exempt from
the FLSA’s overtime requirements or otherwise withhold
overtime pay, as they will be little the worse off if and
when sued to enforce the statute’s requirements.
We would add that cases like this one, where the em-
ployee has routinely worked more than a 40-hour week,
do not truly fit the fluctuating workweek paradigm, in
that the employee’s hours rarely if ever drop below 40. See
§ 778.114(c) (“Typically, such salaries are paid to em-
ployees who do not customarily work a regular schedule
of hours and are in amounts agreed on by the parties
as adequate straight-time compensation for long work-
weeks as well as short ones, under the circumstances of
the employment as a whole.”) (emphasis ours); Heder v.
No. 08-3117 43
City of Two Rivers, Wis., 295 F.3d 777, 779-80 (7th Cir.
2002). Use of the FWW method in these cases makes it
look more like a way to simply reduce the employee’s
compensation rather than to compensate for fluctuations
above and below the standard 40-hour week. And rather
than giving employers an incentive to reduce employees’
working hours and to spread available work among
greater numbers of employees, as the statutory over-
time pay requirement was meant to do, see Walling v.
Youngerman-Reynolds Hardwood Co., supra, 325 U.S. at 423-
24, 65 S. Ct. at 1244; Missel, 316 U.S. at 577-78, 62 S. Ct.
at 1220, the FWW method would seem to give them
exactly the opposite incentive, for as the workweek length-
ens, the employer is paying her less per hour in straight-
time pay and owes her a correspondingly smaller
overtime premium for each hour of work over 40. In
short, the hourly cost of labor using the FWW method
decreases the longer the employee is required to work.
There are answers to these criticisms. First, the Supreme
Court in Missel was well aware of the ways in which the
FWW method of calculating straight-time pay and over-
time pay reduced the amounts owed to the employee for
hours worked in excess of the standard workweek. It
adopted that method nonetheless. 316 U.S. at 580, 62
S. Ct. at 1221. Second, even if the 50-percent overtime
premium that Urnikis-Negro achieves by way of a law-
suit is no more than the defendants would (and should)
have paid her in the first instance in complying with
section 778.114(a), that is not the sole relief to which she
is entitled. The district court awarded her liquidated
damages equal in amount to the award of the overtime
44 No. 08-3117
premium based on the finding that the defendants’ viola-
tion of the FLSA was wilful, and it also awarded Urnikis-
Negro her attorney’s fees and costs. So the defendants
are in some real sense suffering the consequences of not
complying with their legal obligations in the first in-
stance. Finally, the pattern of working excess hours
appears also to have been present in Missel, where the
plaintiff worked an average workweek of 65 hours (more
than 20 hours over the applicable maximum), 316 U.S.
at 574, 62 S. Ct. at 1218, and yet the Court had no hesita-
tion in embracing the FWW method of calculating his
regular hourly rate of pay. It was enough, in the Court’s
view, that Missel’s hours varied, despite the evident
possibility that they fluctuated only above the statutory
maximum rather than below it. More to the point, we
found it proper to apply section 778.114 in Condo v. Sysco
Corp. despite our acknowledgment that the plaintiff never
worked less than 40 hours per week. 1 F.3d at 602-03.
See also § 778.114(b) (setting forth example in which em-
ployee’s hours in each of four workweeks meet or
exceed 40).
It is not within our province to pass on the merits of
these competing arguments. Our job is to apply the
statute as Congress has written it and as the Supreme
Court and the Department of Labor have interpreted it.
Any argument to the effect that the fluctuating workweek
method of calculating one’s regular rate of pay and over-
time premium is insufficiently compensatory to the
plaintiff and insufficiently deterring to the employer
that is inclined to neglect its obligations under the FLSA
is an argument better addressed to Congress and the
Secretary of Labor.
No. 08-3117 45
III.
The district court correctly calculated Urnikis-Negro’s
regular rate of pay and the premium to which she was
entitled for the overtime hours she worked while in the
defendants’ employ. We therefore A FFIRM the district
court’s judgment. We thank Urnikis-Negro and her
counsel for the excellent briefing on the issue presented.
8-4-10