The discussion in the prior section sets forth one result of
reducing the workweek from 40 to 35 hours. It is not either the
necessary result or the only possible result. As in all cases of
employees hired on a salary basis, the regular rate depends in part on
the agreement of the parties as to what the salary is intended to
compensate. In reducing the customary workweek schedule to 35 hours the
parties may agree to change the basis of the employment arrangement by
providing that the salary which formerly covered a fixed workweek of 40
hours now covers a variable workweek up to 40 hours. If this is the new
agreement, the employee receives $200 for workweeks of varying lengths,
such as 35, 36, 38, or 40 hours. His rate thus varies from week to week,
but in weeks of 40 hours or over, it is $5 per hour (since the agreement
of the parties is that the salary covers up to 40 hours and no more) and
his overtime rate, for hours in excess of 40, thus remains $7.50 per
hour. Such a salary arrangement presumably contemplates that the salary
will be paid in full for any workweek of 40 hours or less. The employee
would thus be entitled to his full salary if he worked only 25 or 30
hours. No deductions for hours not worked in short workweeks would be
made. (For a discussion of the effect of deductions on the regular rate,
see Secs. 778.304 to 778.307.)
[46 FR 7316, Jan. 23, 1981; 46 FR 33516, June 30, 1981]
