What is “Chinese overtime”?

Chinese overtime, also referred to as the fluctuating workweek, is a method of paying overtime to an employee when the employee works over 40 hours a week, without destroying some of the benefits of having the employee be an “exempt employee.”

Under this method of paying overtime, the employer pays the employee a fixed salary for work up to 40 hours a week, but on the occasions when the employee works over 40 hours a week, the employer only has to pay half-time for the hours over 40 hours a week. To comply with the FLSA and qualify for “Chinese Overtime”, the employee’s hours must vary from week to week, that rate of pay used to calculate the employee’s half-time overtime rate must not fall under the federal minimum wage, and that the employer and employee clearly understand that the salary will cover all hours worked  in a workweek, even if only a small amount of time is worked. While this is a lawful pay practice if implemented correctly, mistakes and abuses that deny workers proper compensation are considered FLSA violations.