What Is Chinese Overtime?
Variable rate overtime, AKA “Chinese overtime,” is an informal term for the way the Fair Labor Standards Act (FLSA) defines and regulates the payment of employees who work “fluctuating workweeks.”
Which employers use this method and how can you know if Chinese overtime applies to you? Keep on reading!
How Does Chinese Overtime Work?
Under the FLSA, some employers are allowed to pay certain workers overtime at a much lower rate than is usually required. Normally, workers are entitled to an overtime wage of one-and-a-half their “regular rate” for hours worked over the standard 40 hours per week. Workers who make “Chinese overtime,” on the other hand, are paid at one-half their regular rate.
For Chinese overtime to be legal, employers have to meet 5 specific requirements. Here’s how to know if you’re being paid “Chinese overtime” legally:
1. You Work A “Fluctuating Workweek”
A “fluctuating workweek” is one that changes. If an employee works 40 hours one week and then 20 hours the next, their workweek is fluctuating; the number of hours actually worked has changed.
That doesn’t necessarily mean that your hours are unpredictable. Several federal courts have found that employees who work variable hours on a regular schedule can be legally paid the “Chinese overtime” rate of one-half their regular hourly wage.
For example, an employee who is always scheduled to work 32 hours on the first and third weeks of a month, and 46 on the second and fourth weeks, may have a valid fluctuating workweek schedule under federal law.
2. You Make A Fixed Salary, No Matter Your Hours
But for Chinese overtime to be legal under the FLSA, workers have to be paid a fixed salary for each week, regardless of how many hours they actually worked.
Miguel is paid a set salary of $320 every week. One week he’s scheduled to work for 28 hours, and he gets paid $320 for that week. The next week Miguel works 36 hours, and he gets paid $320 for that week, too. Even in the unlikely event that Miguel was only needed for 2 hours in a week, he would still make $320.
Miguel works a “fluctuating workweek” as defined by the FLSA; he’s called upon to work different hours each week, but still gets paid the same fixed salary.
3. You Make At Least Minimum Wage
For workers with fluctuating workweeks, the hourly wage changes depending on how many hours they work. But in any case, that hourly wage has to be at least the applicable minimum wage.
Miguel’s situation satisfies this requirement:
Miguel works 28 hours the first week and makes $320. His hourly rate for that week comes out to around $11.43 per hour, well above the federal minimum wage of $7.25 per hours worked. In the second week, Miguel works more: 36 hours. But his hourly pay, $8.89, remains above the minimum.
For weeks that you work over 40 hours, your hourly pay needs to stay above the federal or state minimum wage that applies in your case, too. We’ll see in a bit how this requirement can get Miguel’s employer into trouble.
4. You Have A “Clear, Mutual Understanding” With Your Employer
As an employee, your employer has to inform you that:
- Your fixed salary applies to all weeks, no matter how many hours you work
- You’ll receive overtime pay at one-half your regular per hour rate for the week you worked more than 40 hours
In most cases, an employee doesn’t need to consent to this agreement; they just need to be told about it.
5. You Make Overtime At Half Your Regular Rate
If requirements 1 through 4 have been satisfied, your employer is allowed to pay you the “Chinese overtime” wage of one-half your regular rate for extra hours.
But again, this lower overtime wage can quickly become unlawful, depending on the number of hours you actually worked in a week. Let’s look at two different weeks that Miguel worked and see how his situation changes:
Miguel is a nonexempt employee, which means he’s entitled to receive payment for the overtime hours. As we’ve seen, he works a valid fluctuating workweek. One week, he works 43 hours.
But to find out if his employer is allowed to pay him one-half his regular rate, we need to know that the regular rate is at least the minimum wage. Since $320 divided by 43 is $7.44, Miguel’s hourly wage for that week just sneaks by.
Chinese Overtime Calculation
Miguel should be paid $320 plus $11.16, which is half his regular rate ($3.72) multiplied by 3 hours, for a total of $331.16.
Now let’s find out what happens when Miguel works even more:
Miguel works 46 hours in a single week. Calculating his regular per hour rate, we have $320 divided by 46, or $6.95 per hour. That’s lower than the FLSA minimum wage of $7.25, and his employer can’t legally pay him “half-time” for those 6 extra hours.
Instead, Miguel’s employer has to pay him overtime at the normal FLSA rate: “time-and-a-half.”
Miguel is entitled to $382.55, his base salary of $320 plus $62.55, which is 1.5 times his regular rate of $6.95 multiplied by 6 hours.
The crucial point to note here is that your regular rate has to change every week, depending on how many hours you worked. If that regular rate drops below the minimum wage, you are entitled to full overtime wages.
Common Chinese Overtime FLSA Violations
Many employees who look like they legally qualify for “Chinese overtime” actually don’t, and this can be a big source of FLSA wage and hour violations.
Take a good look at your employment policies. Are you really guaranteed your fixed salary, no matter what? If your policy says that you’re not entitled to pay for jury duty or other unforeseen circumstances, you’re not. In that case, you may be entitled to a lot of back pay.
Or what if you make more than your fixed salary in a week? That also means you’re not guaranteed the same amount of money each week. Bonuses, commissions, any sort of additional pay can violate the FLSA’s “fluctuating workweek” standard.
Are You Making The Money You’ve Earned?
Maintaining a legal “Chinese overtime” scheme is hard work. For one, employers have to calculate each salaried employee’s changing hourly rate every week.
In our experience, most companies screw this up. When they do, and workers aren’t being paid fairly, civil lawsuits can be the only remedy.
Contact the attorneys at WageAdvocates.com to learn more about how much you should really be making in overtime pay.