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What is Chinese overtime, and is it legal?

On Behalf of | May 27, 2022 | Wage & Hour Litigation

The fluctuating workweek method of calculating overtime compensation, also known by the outdated name “Chinese overtime,” is a practice used by some employers to pay you less than they should. This method for computing overtime is only permitted in limited circumstances. Specifically, it is supposed to be used to determine the amount of bonus compensation for employees who have fixed weekly salaries but have hours that change from week to week. Here is how it works:

The normal overtime rate is one and half times someone’s hourly rate

The normal overtime rate kicks in when someone works more than 40 hours per week. So if you did 45 hours this week and your usual rate is $20 per hour, you should receive your regular hourly rate of pay for the first hour and one and a half times that rate for your five overtime hours, as shown below:

  • 40 hours at $20 = $800
  • 5 hours at $30 = $150
  • Total: $950

Using the Chinese overtime method allows an employer to pay you less for overtime

The fluctuating workweek method lets your employer pay the overtime you work at half your usual rate rather than one and half times your usual rate. An example of how this works is provided below:

  • 40 hours at $20 = $800
  • 5 hours at $10 = $50
  • Total: $850

So in this example, you would be $100 worse off if paid by the Chinese overtime method. However, employers can only apply this rule when they meet all qualifying conditions:

  • They must pay you a fixed salary, and they must still pay it in full when you work less than 40 hours a week.
  • Your hours need to vary from week to week. In other words, if you typically work 9 to 5, your employer cannot apply this method to calculate your overtime.
  • You must still get more than the legal minimum wage for all the hours you work once you add your fixed salary into the equation.

If you feel your employer has applied this method for computing your overtime without meeting all the qualifying conditions, seek legal help to investigate bringing a wage and hour claim.