clearly understood that they would be paid a fixed weekly salary regardless of the number of hours
they worked[, concluded] that the fluctuating workweek is an appropriate method of calculating any
overtime compensation due.” /d. In reaching this conclusion, the Tumulty court expressly rejected
the reasoning of Rainey, without elaboration. /d.

Once again, the court finds the reasoning of Valerio and Blackmon persuasive. Nothing in
the language of § 778.114 mandates that the fluctuating workweek method of calculations is
precluded where the overtime payments are awarded retroactively as a remedy. As long as the
employee has agreed, without contemporaneous objection, to receive a fixed salary for fluctuating
hours of work, the fluctuating workweek method of calculating overtime applies. Thus,
RadioShack’s failure to make contemporaneous overtime payments to the Subclass Plaintiffs does
not act as a bar to use of the fluctuating workweek method.

I. Alternative Overtime Calculation

in the event RadioShack is not entitled to apply a fluctuating workweek method of
calculating overtime pay for certain employees, the Subclass Plaintiffs urge the court to adopt the
standard set forth in Cowan v. Treetop Enterprises. Specifically, Cowan noted that under §
778.113, an employee's regular rate of pay is determined by dividing the weekly salary by “the
number of hours the salary is intended to compensate, not necessarily the number of hours the
employee actually works.” 163 F. Supp. 2d at 938. The court found that the plaintiffs’ salary
covered 53 hours of work per week, and awarded them one-half times their regular rate of pay for
all hours worked between 40 and 53, plus one and one-half times their regular rate of pay for all
hours worked over 53. /d. at 939.

In support of this position, the Subclass Plaintiffs cite numerous RadioShack documents
stating that Y store managers were expected to work at least 54 hours per week. (Exs. 7-16 to Pl

Mem.) The Subclass Plaintiffs also submitted a second expert report from J. Dean Speer, a former

14


met here. The Subclass Plaintiffs argue, further, that the regulations also impose a sixth
requirement: that the employee receive, contemporaneously with his or her work hours, “extra
compensation, in addition to [his or her] salary, for all overtime hours worked at a rate not less than
one-half his [or her] regular rate of pay.” 29 C.F.R. § 778.114.

A. Compensation at Minimum Wage

The Subclass Plaintiffs argue, first, that RadioShack is not entitled to the “fluctuating
workweek” determination because the salaries class members received from RadioShack did not
compensate them at a level equal to or above the applicable minimum wage rate — $5.15 per hour
— in their longest workweeks. 29 C.F.R. § 778.114(a); 29 U.S.C. § 206(a)(1).>_ The Subclass
Plaintiffs claim, for example, that from 1999 through 2001, the base salary for Y store managers
was $21,000 per year, and that class members routinely worked in excess of 80 hours per week
(PI. Mem., at 4.)* An annual salary of $21,000 divided by 52 weeks equals a weekly salary of
$403.85. Any Y store managers who worked 79 or more hours in a given week thus received less
than the applicable minimum wage in that week (at 79 hours per week, an employee earning a
$21,000 annual salary is compensated at $5.11 per hour). The Subclass Plaintiffs direct the court
to an exhibit showing that a combined list of class members worked in excess of 80 hours per week
a total of 2,642 times between 2000 and 2004. (Ex. 2 to Pl. Mem.) The exhibit does not indicate,
however, whether all Y store managers were in fact earning $21,000 per year.

RadioShack counters that Y store managers working in stores with annual sales of $1

million actually earn $24,000 per year. In addition, employees receive additional “tenure pay"

3 The minimum wage has since increased to $5.25 per hour, but the parties agree that

the minimum wage during the relevant time period was $5.15.

4 Plaintiffs’ Brief Re Calculation of the Overtime Rate for Class Members Receiving

Summary Judgment is cited as “Pl. Mem., at __.”

5


B. Clear Mutual Understanding

The Subclass Plaintiffs also object to the use of the fluctuating workweek method on the
grounds that the parties lacked a “clear mutual understanding” of such an arrangement. Relying
on Rainey v. American Forest and Paper Ass'n, Inc., 26 F. Supp. 2d 82 (D.D.C. 1998), the
Subclass Plaintiffs argue that “when an employer misclassifies an employee as exempt from the
overtime provisions of the FLSA,” there can be no clear mutual understanding of payment pursuant
to a fluctuating workweek. In Rainey, the defendant employer wrongly classified an employee as
exempt under the FLSA. 26 F. Supp. 2d at 86. The employer argued that the court should apply
the fluctuating workweek method of calculating the employee’s overtime compensation because
it paid her a flat amount each week. /d. at 99-100. In rejecting the argument, the court held, in
part, that the parties could not have had a clear mutual understanding regarding the fluctuating
workweek given that the employer classified the employee as exempt. “If the parties had originally
agreed that plaintiff's compensation would be governed by the fluctuating workweek method, then
defendant would have had to have conceded from the start that plaintiff was covered by” the
overtime provisions of the FLSA. /d. at 102. Having failed to do so, the employer was not entitled
to rely upon the fluctuating workweek method in calculating the plaintiff's overtime pay. /d.

RadioShack urges the court to rely instead on several cases holding that a clear mutual
understanding may be based on an implied-in-fact agreement. In Mayhew v. Wells, 125 F.3d 216
(4th Cir. 1997), for example, the Fourth Circuit held that a clear mutual understanding may be
“based on the implied terms of one’s employment agreement if it is clear from the employee's
actions that he or she understood the payment plan in spite of after-the-fact verbal contentions
otherwise.” /d. at 219. The employee in Mayhew worked as a non-exempt drug abuse education
and correctional officer. He owned a dog that was used on occasion as the sheriff department's

tracking dog, and sued to recover overtime pay for his time spent caring for the dog. /d. at 217.

10


evidence that the base salary failed to provide the minimum wage in five weeks in one year, where
that variance was not foreseeable to the employer. See Davis v. Friendly Exp., inc., No. 02-14111,
2003 WL 21488682, at *2 (11th Cir. Feb. 6, 2003) (rejecting plaintiffs’ assertion that “no fluctuating
workweek calculation is available if even one time the base salary fails to achieve the minimum
wage.”) See also Aiken v. County of Hampton, 172 F.3d 43 (Table) (4th Cir. 1998) (rejecting
plaintiff's assertion that “once a minimum wage adjustment is made, the employer and employee
must reach a new understanding as to hours and compensation,” where the plaintiff “d[id] not argue
that falling below minimum wage was ‘foreseeable’ except that it happened five times (to four
different officers) in a two-year period, and therefore it might happen again.”)

In this case, the Subclass Plaintiffs make much of the fact that class members worked more
than 80 hours per week some 2,642 times between 2000 and 2004. The problem with the
Subclass Plaintiffs’ supporting exhibit is that it does not consider the number of times each
individual employee worked more than 80 hours per week. Significantly, it appears that there may
be considerable variance among class members on that matter. Steven J. Ayers, for example,
worked more than 80 hours on only one occasion (120 hours the week ending December 14,
2001), whereas Wolfgang Pflaum worked more than 80 hours on approximately 50 occasions, and
Humberto Gonzalez worked more than 80 hours on some 14 occasions. (Ex. 2 to Pl. Mem.) In
addition, the Subclass Plaintiffs fail to confirm each manager's actual compensation at the time he
or she worked more than 80 hours in a week. Compare Inniss v. Tandy Corp., 141 Wash. 2d 517,
533-34, 7 P.3d 807, 816 (2000) (upholding RadioShack's “V” store manager pay plan under
Washington state law where “the actual weekly compensation for each Petitioner was never less
than the total weekly compensation based upon the minimum hourly wage.”)

Nor is it clear that all affected class members’ names appear on the chart; there may be
class members who never worked more than 80 hours in a week and, thus, always received a
salary within the minimum wage rate. Finally, the parties have not yet agreed on the total number

7


ranging from $1,000 to $8,000 per year. (Def. Supp., at 3.)® Class members in certain markets
also receive an increase in salary to account for higher costs of living, ranging from $1,700 to
$7,500 per year. Finally, all Y store managers are eligible for bonuses and commission payments
(Id.) The Subclass Plaintiffs deny that bonuses and commissions are included in calculating fixed
salary, and argue that even assuming a base salary of $28,000 per year, “there are still at least 49
instances where the salary fell below the minimum wage.” (PI. Reply, at 2, 4; Ex. 2 to Pl. Mem.)®

The Department of Labor has issued an opinion letter stating that a fluctuating workweek
may apply as long as an employee's base salary actually provides an employee with an average
hourly rate not less than the applicable minimum wage, or “is reasonably calculated to” do so. 27
Op. Wage and Hour Admin. 945 (1969) (“Opinion Letter 945”); Cash v. Conn Appliances, Inc., 2
F. Supp. 2d 884, 894 (E.D. Tex. 1997). This last phrase means that the employee will not become
eligible for overtime pay merely because there are “infrequent occasions when unforeseen events
cause the employee to work so many hours that her salary fails to support an average hourly rate
at least equal to the minimum wage.” Cash, 2 F. Supp. 2d at 894. If the breaches become too
common, however, the employer must cease using the fluctuating workweek method and reach
anew understanding with the employee. /d. at 895. See also 51 Op. Wage and Hour Admin. 1010
(1969) (“Opinion Letter 1010”) (requiring an employer to renegotiate the overtime calculation where
the base salary failed to provide the minimum wage in 27 weeks).

Relying on Opinion Letters 945 and 1010, in an unpublished opinion the Eleventh Circuit

concluded that an employer was permitted to use the fluctuating workweek method despite

5 Defendant RadioShack Corporation’s Supplemental Brief in Support of Using a Half-

Time Rate to Calculate the Overtime Premium for any Non-Exempt Salaried Class Members is
cited as “Def. Supp., at__.”

6 Plaintiffs’ Brief in Reply to RadioShack's “Supplemental Brief in Support of Using
a Half-Time Rate to Calculate the Overtime Premium for Any Non-Exempt Salaried Class
Members’ is cited as “PI. Reply, at__.”


to include “all remuneration for employment paid to, or on behalf of, the employee.” (Def. Supp.,
at 3.) The regulation identifies several exceptions, only one of which has any arguable relevance
here: “[s]ums paid in recognition of services performed during a given period [are not counted] if
... (a) both the fact that payment is to be made and the amount of the payment are determined
at the sole discretion of the employer at or near the end of the period and not pursuant to any prior
contract, agreement, or promise causing the employee to expect such payments regularly.” 29
C.F.R. § 778.200. To the extent Y store managers are eligible for sales-based bonuses each
month as a matter of course, this exception is not applicable. (See Y Store Manager Pay Plan,
2002-2004, Ex. 10 to Def. Mem.)

The Subclass Plaintiffs nonetheless urge that only salary may be considered for purposes
of the fluctuating workweek test. They cite Cash v. Conn Appliances, Inc., 2 F. Supp. 2d 884 (E.D
Tex. 1997), (PI. Reply, at 1), but in that case the court held merely that for purposes of 29 C.F.R.
§ 778.114, the “salary basis” test is met where “a fixed sum [is] paid at regular intervals of time that
serves as the foundation of employee non-overtime pay.” /d. at 905. See also Parks v. Locating,
Inc., No. C99-1488Z, 2000 WL 33964347, at “1 (W.D. Wash. July 24, 2000), rev'd on other
grounds, 37 Fed. Appx. 901 (9th Cir. 2002) (“[I]n Cash, the court concluded that [the] salary basis
test was met under the fluctuating workweek method so long as a sum certain was paid at regular
intervals and from which no deductions were made in instances where the employee['s] scheduled
work hours fell below 40 per week.”) There is no dispute here that the Subclass Plaintiffs’
compensation satisfies this salary basis test. So long as commissions and bonuses are paid each
month as a matter of course, those amounts must be included in determining the Subclass

Plaintiffs’ regular rates of pay.


UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

ALPHONSE L. PEREZ and DOUGLAS G.
PHILLIPS, individually, and on behalf of all
others similarly situated,
Plaintiffs,
v. No. 02 C 7884

RADIOSHACK CORPORATION, Judge Rebecca R. Pallmeyer

)
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Defendant.

MEMORANDUM OPINION AND ORDER

Plaintiffs Alphonse L. Perez and Douglas G. Phillips filed suit against Defendant
RadioShack Corporation under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 207 et seq.,
seeking to recover overtime pay on behalf of an “opt-in” class of persons who routinely worked
more than 40 hours per week as “Y store” managers. RadioShack insists that Y store managers
are exempt from such overtime pay because they are “employed in a bona fide executive .
capacity.” 29 U.S.C. § 213(a)(1). Under the “short test” applicable in this case, an individual
qualifies as an exempt executive if (1) his or her primary duties are management of the enterprise
or a subdivision thereof; and (2) the employee regularly and customarily directs the work of two or
more other employees within that enterprise or subdivision thereof. 29 C.F.R. § 541.1(f) (July 1,

2004)."

' For purposes of this action, the parties agree that the FLSA “short test” applies

because Y store managers earn more than $250 per week. 29 C.F.R. §§ 541.1(f), 541.119 (July
14, 2004). The Department of Labor has since amended the regulations and significantly altered
the “short test” to provide that employees earning less than $100,000 annually are deemed exempt
only if they satisfy the following four-part test

(1) the employee receives weekly compensation of at least $455; (2) the employee's
“primary duty” is management of the enterprise or a recognized subdivision thereof,
(3) the employee “customarily and regularly directs the work of two or more other
employees”; and (4) the employee has the authority to hire and fire persons or his
or her recommendations and suggestions as to hiring, firing, and promotion “are


“[t]he plaintiffs all continued to work for years” and received fixed amount of pay regardless of the
number of hours worked)

The court finds the reasoning of Mayhew, Blackmon, Valerio, and Zoltek persuasive. Like
the employees in those cases, the Subclass Plaintiffs all received a fixed salary regardless of the
number of hours they worked each week, and they understood that their hours would vary from
week to week. It appears, further, that at least some class members accepted this arrangement
without protest. Plaintiffs Perez and Douglas never asked RadioShack about overtime pay. (Perez
Dep., Ex. 2 to Def. Mem., at 31 (“Q: Have you ever asked anyone at RadioShack to receive
overtime? A: No. Q: Have you ever complained to anyone at RadioShack about not receiving
overtime? A: No.”); Douglas Dep., Ex. 5 to Def. Mem., at 79 (“Q: Did you at any point in time make
any complaints to anyone in RadioShack's chain of management . . . about the fact that your
position was classified as exempt from overtime? A: No, | didn't.”).) There is no evidence in that
regard, however, as to any of the other Y store managers, nor any indication whether Y store
managers who supervised fewer subordinates reacted differently. See Zoltek, 884 F. Supp. at 286
(noting that there is no implied agreement “if the employee contemporaneously protests" to a
compensation plan). Absent further evidence on this issue, the court cannot determine whether
class members had a “clear mutual understanding” that they were being compensated on a fixed
salary.

Cc. Extra Compensation

The Subclass Plaintiffs next argue that the fluctuating workweek method of calculating
overtime pay is inappropriate here because RadioShack failed to provide contemporaneous
payment of overtime compensation. (Pl. Mem., at 6.) See Rainey, 26 F. Supp. 2d at 100
(‘[C]ontemporary payment of overtime compensation is a necessary prerequisite for application of

the fluctuating workweek method.") According to the Rainey court, § 778.114 “contains no

12


The sheriff's department argued that the court should adopt a fluctuating workweek method of
calculating the overtime because the officer was employed on a fixed salary for fluctuating hours.
Id. at219. The Fourth Circuit agreed and noted that the parties also had the requisite clear mutual
understanding that the officer would be paid a fixed salary. /d. The officer testified that he
understood he would never be paid more than his fixed salary regardless of the number of hours
he worked, and that his pay would never be docked if he worked less than the expected number
of hours. /d.

In Blackmon v. Brookshire Grocery Co., 835 F.2d 1135 (5th Cir. 1988), the employer
misclassified as exempt two meat market managers who filed suit to recover overtime pay. In
calculating the amount of compensation owed, the court utilized the fluctuating workweek method
based on evidence that the employees understood that “they would be paid a fixed weekly salary,
and would work whatever number of hours were required to get the job done.” /d, at 1137, 1138.
In Valerio v. Putnam Assocs. Inc., 173 F.3d 35 (1st Cir. 1999), similarly, the First Circuit held that
the plaintiff agreed to a fluctuating workweek where she understood that she would receive a fixed
salary for working “from 8:30 to whenever.” 173 F.3d at 39. In reaching this conclusion, the court
rejected the employee’s argument that “[bJecause the parties initially agreed that [the employee]
would not receive any additional payments for overtime hours, no agreement regarding calculation
of overtime existed.” /d. In the court's view, “the regulation calls for no such enlarged
understanding.” /d. See also Zoltek v. Safelite Glass Corp., 884 F. Supp. 283, 286 (N.D. Ill. 1995)
(employee impliedly consented to payment at a fixed sum per week regardless of the hours worked
where for almost two and a half years the parties conducted themselves as if the employee was
properly classified as exempt under the FLSA, and the employee never protested that “(hJis hours
per week varied considerably [but] his paycheck was always the same.”); Braddock v. Madison

County, 34 F. Supp. 2d 1098, 1105 (S.D. Ind. 1998) (finding clear mutual understanding where

11


of Y store managers included in this subset of Plaintiffs. (See Joint Status Report, at 5 (Doc. No.
368) (stating Plaintiffs’ belief that 871 managers are entitled to immediate judgment, compared with
RadioShack’s position that a final count “must await further information and direction from the
court.”).) “Concluding from the [exhibit] that regular minimum wage violations occurred without
these pieces of information constitutes nothing more than sheer speculation.” Cash, 2 F. Supp.
2d at 907 (finding plaintiffs’ list of employees purportedly due overtime because of minimum wage
violations “unhelpful because plaintiffs neither identify the persons on the list whose average hourly
rate fell under the applicable minimum wage and number of times each of those individuals
suffered that fate, disclose the total number of violations that the list covers, nor relate how many
coefficient employee salaries were paid during the period the list encompasses.")

Contrary to the Subclass Plaintiffs’ suggestion, this is not a case where RadioShack's
general salary structure is such that it “knew managers would be required to work in excess of 80
hours.” (PI. Reply, at 5.) RadioShack documents all indicate that Y store managers are expected
to work 5 or 6 days per week for a total of 54 hours, far below the number at which the Subciass
Plaintiffs’ salaries no longer provide a minimum wage. (See Exs. 6-19 to PI. Mem.) The court is
unable to conclude that RadioShack should have foreseen as a matter of course that Y store
managers would routinely work more than 80 hours per week. Indeed, by the Subclass Plaintiffs’
own estimation, Y store managers earning $28,000 per year received below the minimum wage
on only 49 occasions in four years. (PI. Reply, at 4; Ex. 2 to Pl. Mem.) Thus, a determination
whether RadioShack paid its Y store managers a fixed salary sufficient to compensate them at the
applicable minimum wage for purposes of the fluctuating workweek method of calculating overtime
pay must be made on an individual employee basis.

Before leaving this issue, the court notes that the parties disagree as to whether monies
received for commissions and bonuses must be included in calculating an employee's “regular rate”
of pay. RadioShack claims that they must, noting that 29 C.F.R. § 778.200 defines “regular rate"

8


during which it was earned. The employee must then receive additional overtime

compensation for each week during the period in which he worked in excess of the

applicable maximum hours standard. The additional compensation for that

workweek must be not less than one-half of the increase in the hourly rate

attributable to the commission for that week multiplied by the number of hours

worked in excess of the applicable maximum hours standard in that workweek.
29 C.F.R. § 778.119.

The Subclass Plaintiffs insist that the fluctuating workweek method cannot apply here
because RadioShack has not satisfied the necessary prerequisites. Specifically, the Subclass
Plaintiffs claim that they were not always compensated at the minimum wage rate, they did not
have a clear mutual understanding regarding their payment, and they did not receive any extra
compensation at the time they worked overtime hours. Even if the fluctuating workweek method
does apply, the Subclass Plaintiffs argue, the court should adopt the alternative overtime
calculation set forth in Cowan v. Treetop Enterprises, 163 F. Supp. 2d 930 (M.D. Tenn. 2001).
LF Fluctuating Workweek

As described above, the Subclass Plaintiffs believe they are entitled to recovery of one and
one-half times their hourly pay for all hours worked in excess of 40 per week. RadioShack argues
that the Subclass Plaintiffs’ unpaid overtime compensation should be calculated pursuant to the
fluctuating workweek method set forth in 29 C.F.R. § 778.114. As explained in the regulation,
employers may utilize this method only if the employer can show: (1) the employee's hours
fluctuate from week to week; (2) the employee receives a fixed weekly salary that remains the
same regardless of the number of hours worked per week; (3) the fixed salary is sufficient to
provide compensation at a regular rate not less than the legal minimum wage; (4) the employee
receives at least 50 percent of his regular hourly pay for all overtime hours worked; and (5) the
employer and the employee have a clear mutual understanding that the fixed salary is

compensation (apart from overtime premiums) for the hours worked each workweek. /d. See a/so

Condo, 1 F.3d at 601-02. The Subclass Plaintiffs contend the third and fifth requirements are not


employee of the Wage and Hour Division of the U.S. Department of Labor ("WHD"). (Speer Expert
Report of 10/12/05, Ex. A to Def. Strike Reply.)’ Mr. Speer explained that in determining the
parties’ understanding as to the number of hours an employee's salary is intended to compensate,
the WHD (1) interviews the employee, other employees “similarly employed," the employee's
supervisor, human relations managers, and senior management; and (2) reviews written materials
such as employee manuals, job descriptions, personnel manuals, and training manuals. (/d. at 5.)
RadioShack objects to the Cowan method of calculation but merely reiterates its theory that the
fluctuating workweek method should apply instead. RadioShack also seeks to strike Mr. Speer’s
October 12, 2005 Expert Report on the grounds that it is untimely and invades the province of the
court and the jury.® (Def. Strike Reply, at 3, 7-9.)

In the court's view, the Cowan method presents a reasonable basis for calculating overtime
pay in those instances where the fluctuating workweek method does not apply but an employee
earns a fixed salary designed to cover more than 40 hours of work per week. If some class
members ultimately do not qualify for a fluctuating workweek method of calculating overtime, the
court will utilize the Cowan method as stated in this opinion.

UL. Commissions and Bonuses

The parties do not dispute the proper method for calculating additional overtime
compensation for employees who receive bonuses and commissions. Accordingly, such
calculations must be made pursuant to § 778.119:

To compute this additional overtime compensation, it is necessary, as a general

tule, that the commission be apportioned back over the workweeks of the period

during which it was earned. The employee must then receive additional overtime

compensation for each week during the period in which he worked in excess of the
applicable maximum hours standard. The additional compensation for that

; The Reply Memorandum in Support of Defendant RadioShack's Motion to Strike the

Testimony and Report(s) of Plaintiffs’ Expert J. Dean Speer is cited as “Def. Strike Reply, at__.”

8 The court addresses the motion to strike in a separate opinion.

15


the reasons set forth here, the court finds that the proper method of calculating overtime
compensation must be determined on an individual employee basis.
DISCUSSION?

Under the FLSA, non-exempt employees are generally entitled to overtime pay at a rate of
one and one-half times their regular rate of pay for all hours worked in excess of 40 per week. 29
U.S.C. § 207(a)(1). For employees paid by the hour, this calculation is relatively simple. Plaintiffs
here, however, are paid on a salary basis, and also receive commissions and bonuses. Where an
employee is paid on a salary basis, the regular hourly rate is determined by “dividing the salary by
the number of hours which the salary is intended to compensate.” 29 C.F.R. § 778.113. The
employee then receives one and one-half times that regular rate of pay for all hours worked in
excess of 40 per week.

An exception applies where employees have hours of work that fluctuate but receive a fixed
salary for all straight-time hours worked. 29 C.F.R. § 778.114. In such cases, the regular hourly
rate is determined by dividing the fixed weekly salary by the number of hours the employee actually
works in a particular week. The employee then receives one-half his or her regular rate of pay for
all hours worked over 40 per week. /d.; Condo v. Sysco Corp., 1 F.3d 599, 605 (7th Cir. 1993)
(‘The fixed salary compensates the employee for ai/ his hours, the overtime ones included. He
therefore receives 100% of his regular rate for each hour that he worked. As such, he is entitled
only to an additional fifty percent of his regular rate for the hours that he worked in excess of forty.”)
(emphasis in original).

For employees who receive commissions or bonuses, the regulations provide as follows:

To compute this additional overtime compensation, it is necessary, as a general
rule, that the commission be apportioned back over the workweeks of the period

2 The facts of this matter are set forth in detail in the court's September 9, 2005

Memorandum Opinion and Order. Perez, 386 F. Supp. 2d at 981-83. This opinion assumes the
reader's familiarity with that earlier decision.


On June 13, 2003, the court allowed Plaintiffs to proceed with notice to persons who had
the option of affirmatively choosing to participate in, and be bound by the outcome of this lawsuit.
Perez v. RadioShack Corp., No. 02 C 7884, 2003 WL 21372467 (N.D. Ill. June 13, 2003). In that
opinion, however, the court did express doubts about Plaintiffs’ ability to satisfy the first prong of
the short test, noting that they “face an uphill battle in arguing that management was not their
primary duty.” /d. at*7. As discovery evolved, it became clear that at least some class members
did not supervise two or more full-time workers as required under the second prong of the short
test. Thus, on September 9, 2005, the court announced its determination to grant immediate relief
to all Y store managers who do not meet the second prong of the test for exemption, which the
court defined as those who did not supervise 80 or more hours of subordinate time at least 80%
of the time. Perez v. RadioShack Corp., 386 F. Supp. 2d 979 (N.D. Ill. 2005), reconsideration
denied, (Order of 11/2/05, Doc. No. 360).

The parties now dispute the proper method of calculating the overtime wages due to this
subset of Plaintiffs (the “Subclass Plaintiffs"). RadioShack urges the court to apply the “fluctuating
workweek’ method of calculating overtime and award the Subclass Plaintiffs one-half their regular
rate of pay for each hour worked over 40 in a week. See 29 C.F.R. § 778.114. The Subclass
Plaintiffs argue that their overtime should be calculated at a rate of one-half their regular rate of pay
for all overtime hours worked up to 54, which represents the number of hours their salary is
intended to compensate each week. After that, the Subclass Plaintiffs claim, they should be paid

at a rate of one and one-half times their regular rate for all hours worked beyond 54 per week. For

given particular weight.”

29 C.F.R. § 541.100. See also 29 C.F.R. §§ 541.601(a), 541.601(b). To the extent this action
concerns a time period prior to these regulatory amendments, they do not alter the court’s analysis
here. The court notes, however, that the new regulation contains provisions very similar to the
ones disputed here, and that it appears that all of the employees in question earn more than $455
per week.


suggestion that such compensation need only be paid as part of a judicially crafted remedy, but
rather establishes that it is a necessary precondition to application of the fluctuating workweek
method.” /d. at 101. See also Cowan v. Treetop Enterprises, 163 F. Supp. 2d 930, 942 (M.D.
Tenn. 2001) (agreeing with Rainey that an employer's “prior assertion of exempt status for [its]
employees and the lack of contemporaneous payment of the 50% overtime . . . bar the [employer's]
reliance upon Section 778.114(a).”)

Other courts, however, have not required contemporaneous payment of overtime as a
prerequisite to applying the fluctuating workweek method. In Valerio, for example, the employee
was Classified as exempt and understood that her salary was to compensate her for fluctuating
hours. 173 F.3d at 37, 39-40. The district court concluded that the employee was not exempt
under the FLSA and awarded her overtime pay using the fluctuating workweek method. The
employee appealed, arguing in part that she was entitled to payment at a rate of one and one-half
times her regular rate of pay for all overtime hours. The First Circuit held that the district court
properly applied the fluctuating workweek method because the parties reached a clear mutual
understanding that “while the employee's hours may vary, . . . her base salary will not.” /d. at 40
In Blackmon, similarly, the Fifth Circuit utilized the fluctuating workweek method of calculating
overtime pay for two employees who had been misclassified as exempt from overtime pay. 835
F.3d at 1137, 1138. The court explained that the employees understood that “they would be paid
a fixed weekly salary, and would work whatever number of hours were required to get the job
done.” /d. at 1138.

More recently in Tumulty v. FedEx Ground Package Sys., Inc., No. C04-1425P, 2005 WL
1979104 (W.D. Wash. Aug. 16, 2005), a Washington district court applied the fluctuating workweek
method where a package delivery service, FedEx Ground, failed to pay drivers overtime in the
mistaken belief that they were independent contractors. /d. at*5. The court held that FedEx
Ground was the drivers’ joint employer and, based on “the undisputed evidence that Plaintiffs

13


workweek must be not less than one-half of the increase in the hourly rate
attributable to the commission for that week multiplied by the number of hours
worked in excess of the applicable maximum hours standard in that workweek.
29 C.F.R. § 778.119.
CONCLUSION
The court finds that the proper method of calculating overtime pay must be made on an
individual basis as stated in this opinion. To the extent any class members do not qualify for the

fluctuating workweek method, the court will employ the method set forth in Cowan v. Treetop

Enterprises.

ENTER:

. fa)
Dated: December 14, 2005 { wet o Wee (e. 2
ECCA R. PALME YE
United States District Ju

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