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Date: 02-14-2016

Case Style: Lalli v. General Nutrition Corporation

Case Number: 15-1199

Judge: William J. Kayatta, Jr. David J. Barron

Court: United States Court of Appeals For the First Circuit

Plaintiff's Attorney: Mathew P. Jasinski, William Narwold, Motley Rice

Defendant's Attorney: Robert W. Pritchard, Allison R. Brown, Littler Mendelson

Description: The facts of the case are quite straightforward. GNC
sells health and wellness products through company-owned stores
throughout the United States. Lalli was a store manager at a GNC
store in Massachusetts. As a store manager, Lalli earned a
guaranteed weekly salary regardless of the hours worked that week
and a non-discretionary sales commission that varied based upon
the amount of eligible sales attributed to him for that week.
Whenever Lalli worked over forty hours in a given week, he was
also paid an overtime premium for each hour worked in excess of
the forty hours. In calculating Lalli's overtime, GNC used a
"fluctuating workweek" ("FWW") method to calculate his overtime

- 3 -
pay rate. Under this method, GNC would (1) add together both (a)
the guaranteed salary for the week and (b) the commissions earned
that week; (2) divide the total wages by the number of hours the
employee logged for that week; and (3) pay an additional 50% of
the resulting per hour rate for any hour worked in excess of forty
hours that week.
On December 31, 2013, Lalli filed a two-count complaint
alleging violations of the FLSA and the State Wage Law. Lalli
alleged that GNC's method of calculating overtime violated the
statutes, arguing that the FWW calculation method lawfully applies
only when a business pays a fixed amount for the week. Because
the commission earnings varied from week to week, Lalli alleged
that GNC did not pay him a "fixed" amount. One month later, GNC
moved to dismiss the complaint for failure to state a claim. The
district court allowed the motion, concluding that an employer may
use the FWW method to assess overtime pay rates even when an
employee's weekly pay varies as a result of performance-based
commissions. Lalli then filed the instant appeal.

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II. Analysis
The FLSA1 requires employers to compensate employees for
each hour worked in excess of forty hours during a workweek "at a
rate not less than one and one-half times the regular rate at which
[they are] employed." 29 U.S.C. § 207(a)(1). "[T]he regular rate
refers to the hourly rate actually paid the employee for the
normal, non-overtime workweek for which he is employed." Walling
v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 424 (1945).
If an employee is paid a fixed salary each week
regardless of the hours worked, the employer calculates the
"regular rate" each week by dividing the weekly wages by the hours
worked that particular week. Overnight Motor Transp. Co. v.
Missel, 316 U.S. 572, 580 n.16 (1942). "[T]hough week by week the
regular rate varies with the number of hours worked," it is
"regular in the statutory sense inasmuch as the rate per hour does
not vary for the entire week." Id. at 580. The employer then
multiplies the regular rate by 50% to produce the additional
overtime compensation that must be paid for every hour worked
beyond forty that week. O'Brien v. Town of Agawam, 350 F.3d 279,
                                                             1 The parties agree that the FLSA and the State Wage Law requirements are essentially identical. We see no reason to question this premise. See Valerio v. Putnam Assocs. Inc., 173 F.3d 35, 40 (1st Cir. 1999).

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287 (1st Cir. 2003). Only an additional "half" is required to
satisfy the statute because the "time" in "time-and-a-half" has
already been compensated under the salary arrangement.2 Id. at
All of these principles are echoed and illustrated in
the interpretive bulletins issued by the Department of Labor
("DOL"). In 29 C.F.R. § 778.109, the DOL lays out the general
rule for calculating overtime pay:
The "regular rate" under the Act is a rate per hour. The Act does not require employers to compensate employees on an hourly rate basis; their earnings may be determined on a piecerate, salary, commission, or other basis, but in such case the overtime compensation due to employees must be computed on the basis of the hourly rate derived therefrom . . . . The                                                              2 "The application of the principles above stated may be illustrated by the case of an employee whose hours of work do not customarily follow a regular schedule but vary from week to week, whose total weekly hours of work never exceed 50 hours in a workweek, and whose salary of $600 a week is paid with the understanding that it constitutes the employee's compensation, except for overtime premiums, for whatever hours are worked in the workweek. If during the course of 4 weeks this employee works 40, 37.5, 50, and 48 hours, the regular hourly rate of pay in each of these weeks is $15.00, $16.00, $12.00, and $12.50, respectively. Since the employee has already received straight-time compensation on a salary basis for all hours worked, only additional half-time pay is due. For the first week the employee is entitled to be paid $600; for the second week $600.00; for the third week $660 ($600 plus 10 hours at $6.00 or 40 hours at $12.00 plus 10 hours at $18.00); for the fourth week $650 ($600 plus 8 hours at $6.25, or 40 hours at $12.50 plus 8 hours at $18.75)." 29 C.F.R. § 778.114(b).

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regular hourly rate of pay of an employee is determined by dividing his total remuneration for employment . . . in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid.
Section 778.109 then states that "[t]he following sections give
some examples of the proper method of determining the regular rate
of pay in particular instances."
Two "examples" of compliant pay structures warrant
particularly close attention here. Section 778.114 describes what
to do when an employee receives a "[f]ixed salary for fluctuating
hours." According to the DOL, an employee may be employed on a
salary basis and have hours "which fluctuate from week to week" if
the salary is paid "pursuant to an understanding with his employer
that he will receive such fixed amount as straight time pay for
whatever hours he is called upon to work in a workweek, whether
few or many." 29 C.F.R. § 778.114(a). "Where there is a clear
mutual understanding . . . that the fixed salary is compensation
. . . for the hours worked each workweek, whatever their number,
. . . such a salary arrangement is permitted by the Act" if the
resulting regular rate is sufficient to provide compensation above
the minimum wage rate. Id. As in Missel, the regular rate "is
determined by dividing the number of hours worked in the workweek

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into the amount of the salary." Id. "Payment for overtime hours
at one-half such rate in addition to the salary satisfies the
overtime pay requirement because such hours have already been
compensated at the straight time regular rate." Id. (emphasis
In O'Brien, we restated these conditions in a four
factor test:
(1) the employee's hours must fluctuate from week to week;
(2) the employee must receive a fixed salary that does not vary with the number of hours worked during the week (excluding overtime premiums);
(3) the fixed amount must be sufficient to provide compensation every week at a regular rate that is at least equal to the minimum wage; and
(4) the employer and employee must share a "clear mutual understanding" that the employer will pay that fixed salary regardless of the number of hours worked.
350 F.3d at 288. If the employer uses the FWW method, it must
satisfy a fifth factor in order to comply with the FLSA's overtime
requirement: "the employee [must] receiv[e] a fifty percent (50%)
overtime premium in addition to the fixed weekly salary for all
hours worked in excess of 40 during the week." See Wills v.

- 8 -
RadioShack Corp., 981 F. Supp. 2d 245, 255 (S.D.N.Y. 2013)
(emphasis added).
Section 778.118, on the other hand, describes what to do
when an employee receives a "[c]ommission paid on a workweek
basis." As an adjacent section points out: "Commissions . . .
must be included in the regular rate. This is true regardless of
whether the commission is the sole source of the employee's
compensation or is paid in addition to a guaranteed salary[.]" 29
C.F.R. § 778.117. "When the commission is paid on a weekly basis,
it is added to the employee's other earnings for that workweek .
. . and the total is divided by the total number of hours worked
in the workweek to obtain the employee's regular hourly rate for
the particular workweek." Id. § 778.118. As with the overtime
premium provided under section 778.114, where an employee's
compensation arrangement already accounts for the "time" in "time
and-a-half," the employee who earns a commission on a workweek
basis "must then be paid extra compensation at one-half of that
rate for each hour worked in excess of the applicable maximum hours
standard." Id. (emphasis added).
In the instant case, Defendants employed a pay structure
that combines the example set out in section 778.114 (a fixed
weekly salary regardless of hours worked) with the example set out

- 9 -
in section 778.118 (commissions paid weekly).3 Because each
element reflects a permissible compensation scheme, one might
suspect Defendants to be on solid footing. Instead, Plaintiff
contends that two rights make a wrong, and that the commission
component of the pay arrangement takes the pay scheme as a whole
outside the example provided in section 778.114. The district
court rejected this contention, and we review its determination de
novo. Ruivo v. Wells Fargo Bank, N. Am., 766 F.3d 87, 90 (1st
Cir. 2014).
We agree with the district court and hold that the
payment of a performance-based commission does not foreclose the
application of section 778.114 with respect to the salary portion
of the pay structure at issue.
Lalli was paid a fixed salary for whatever hours he
worked, and Lalli's earned commissions were added to his regular
rate calculation. GNC then paid Lalli a 50% premium on top of the
regular rate for all overtime hours worked. Based on the plain
language of the federal regulations at issue, GNC's compensation
                                                             3 Plaintiff appears to tactically avoid invoking the word "salary" at various points in his pleadings and papers. The district court found that Plaintiff was paid a salary and commissions, and Plaintiff seems to imply that he was salaried in his briefing. We find no reason to imbue a clear record with ambiguity on this point and proceed accordingly.

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arrangement would seem to pass muster. Plaintiff demurs, pointing
first to our decision in O'Brien and next to the DOL's interpretive
bulletins. We turn to O'Brien first.
In O'Brien, this Circuit considered whether the pay
scheme established in a collective bargaining agreement ("CBA")
between a town and its police officers satisfied the fixed salary
requirement of 29 C.F.R. § 778.114(a). 350 F.3d at 286-90. Under
the CBA, officers worked four shifts every six days, each shift
being eight hours. Id. at 282. Officers received 1/52 of a yearly
"base salary" each week regardless of how many hours they worked
that week. Id. at 283.
The CBA also included contractual overtime and shift
differential pay. For the former, an officer would receive
contractually stipulated overtime pay at a rate of time-and-a-half
for each hour worked in excess of eight hours on any given shift,
whether or not the officer was entitled to overtime under the FLSA
at the end of the week.4 Id. at 282. For the latter, an officer
                                                             4 For example, an officer who worked three eight-hour shifts and one ten-hour shift in a given week would be entitled to two hours of contractual overtime at a rate of one and one-half the regular rate, but because the officer did not work in excess of forty hours during the workweek there would be no entitlement to FLSA overtime. O'Brien, 350 F.3d at 282 n.6.

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would receive an additional $10 per week for any week in which the
officer worked a nighttime shift. Id. at 283 n.7.
This Circuit held that both the contractual overtime and
the shift differential meant that the officers did not receive a
"fixed amount as straight-time pay" for whatever hours they worked.
Id. at 289. For this reason, the compensation scheme did not meet
the second, "fixed salary" condition of section 778.114's four
factor test for calculating overtime. Id. at 289-90.
Plaintiff points to some of O'Brien's broader language
in an attempt to extend its holding to the circumstances before
us. This attempt fails. O'Brien examined two forms of
compensation that were ruled to be incompatible with section
778.114. Neither of these forms of compensation is before us, and
both are distinguishable from the commissions at hand.
With respect to contractual overtime, we noted that "the
officers receive[d] more or less straight-time pay depending on
how many contractual overtime hours they work[ed] each week." Id.
at 289. This was inconsistent with section 778.114, which clearly
states that "the salary may be paid [an employee] pursuant to an
understanding with his employer that he will receive such fixed
amount as straight time pay for whatever hours he is called upon
to work in a workweek, whether few or many." (emphasis added).

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Unlike in O'Brien, the employee here received a fixed salary that
did not vary based on the number of hours worked. Thus, O'Brien
is inapposite on this point.
With respect to shift-differential pay, however, the
compensation varied "even without reference to the number of hours
worked." Id. at 288. Rather, the compensation varied with the
type of hours worked because nighttime hours were more valuable
than daytime hours. Id. The O'Brien court held that this too
"does not fit the § 778.114 mold" and made quick work of the
provision, pointing out that merely assuring a level of "fixed
minimum" compensation is not sufficient to place a pay scheme
within section 778.114. Id.
Although the town purported to pay a "base salary," the
salary could not actually be called "fixed" with respect to the
hours worked because the compensation for those hours varied from
week to week. Simply put, one cannot have a "fixed salary" based
on all hours worked if all hours worked do not fall within that
fixed salary. Therefore, because the shift-differential pay was
part of the officers' salary, it "require[d] the larger conclusion"
that the officers did not receive a fixed salary "as straight time
pay for whatever hours [they were] called upon to work in [the]

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workweek." Id. at 289, 288 (citing 29 C.F.R. § 778.114) (emphasis
Plaintiff tries to draw a broader lesson from the O'Brien
language and argues that any additional form of compensation that
must be factored into an employee's regular rate removes the pay
scheme as a whole from the purview of section 778.114 because
employees must receive a "fixed amount" for straight-time labor
each week. See id. at 289. This is based on O'Brien's use of the
term "straight-time pay," which refers to pay for normal, non
overtime hours. See Manning v. Bos. Med. Ctr. Corp., 725 F.3d 34,
55 (1st Cir. 2013).
This view, while tenable, is ultimately unpersuasive
because it inflates the import of a single sentence in our decision
to find answers to questions that were not asked there. Unlike in
O'Brien, the salary here remains fixed regardless of the number or
type of hours worked. Only the commissions vary. Returning to
the DOL's own language, it is evident that "[t]he regulation does
not expressly preclude payment of such bonuses." Switzer v.
Wachovia Corp., No. CIV.A. H-11-1604, 2012 WL 3685978, at *3 (S.D.
Tex. Aug. 24, 2012).

- 14 -
Section 778.114, by its plain language, requires a fixed
salary for hours worked, not a fixed total amount of compensation
for the week:
An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many. (emphasis added).
The "fixed amount as straight-time pay" referred to in O'Brien,
350 F.3d at 288, is the same "fixed amount as straight time pay"
referred to in the text above, 29 C.F.R. § 778.114(a). This, in
turn, refers to the "fixed salary" otherwise mentioned throughout
the regulation. See id. And the term "salary," of course, cannot
be read so broadly as to encompass all forms of compensation
comprising the regular rate. As the district court pointed out,
section 778.117 speaks of commissions being paid "in addition to
a guaranteed salary," a phrase that makes little sense if
commissions are already part of the employee's salary. Similarly,
section 778.109 states that it is the "total remuneration" (except
statutory exclusions) that must be included in the regular-rate
calculation, suggesting that different types of remuneration

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(e.g., salary plus commissions) may be combined in a compliant
compensation plan.
The premiums in O'Brien betrayed any claim that the
officers' salary could be described as fixed regardless of the
hours worked, even if part of that salary (the so-called "base
salary") did not fluctuate. As both the O'Brien court and other
courts have noted, the regulation requires that the fixed salary
cover whatever hours are worked, not merely that "the employees
receiv[e] a minimum salary every week." See Adeva v. Intertek
USA, Inc., No. CIV.A. 09-1096, 2010 WL 97991, at *3 (D.N.J. Jan.
11, 2010); accord O'Brien, 350 F.3d at 288 ("[I]t is not enough
that the officers receive a fixed minimum sum each week.").
In the instant case, the employee was paid on the
combination of a salary basis under section 778.114 and a
commission basis under section 778.118. The employee had "hours
of work which fluctuate[d] from week to week" and the "salary [was]
paid him pursuant to an understanding . . . that he [would] receive
such fixed amount as straight time pay for whatever hours he [was]
called upon to work in [the] workweek." The fact that Lalli was
given additional commissions as straight-time pay for whatever
eligible sales he made does not detract at all from the fact that

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he was given his salary as straight-time pay for whatever hours he
Plaintiff would have us rewrite section 778.114 in the
following manner to be restrictive rather than illustrative:
An employee [may be] employed on a salary basis . . . [for] hours of work which fluctuate from week to week . . . [only if] the salary . . . [is] paid him pursuant to an understanding with his employer that he will receive [only] such fixed amount as straight time pay for . . . [the workweek].
We cannot, and should not, ignore the plain language of the
regulation, especially when doing so runs counter to the statute's
inherently flexible nature. See 149 Madison Ave. Corp. v. Asselta,
331 U.S. 199, 203-04 (1947) ("It was not the purpose of Congress
in enacting the [FLSA] to impose upon the almost infinite variety
of employment situations a single, rigid form of wage agreement.").
In short, Lalli's dissection of O'Brien mistakes the forest for
the trees. GNC's compensation structure fits comfortably within
DOL regulations and nothing in O'Brien compels us to hold
Not only is it therefore unnecessary to extend O'Brien
to encompass commissions, it would also be inappropriate to do so.
That is because, under section 778.114, performance-based bonuses
cannot be said to vary based on the hours worked absent unusual

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circumstances not present here. Although both shift-differential
bonuses and sales commissions may relate to the type of hours
worked in some broad or conceptual sense (insofar as some parts of
the day may typically entail more sales than others), a bonus for
particular hours worked necessarily varies by the hour worked
whereas a commission for sales only incidentally varies by the
hour worked.
When an employee is paid a bonus for working a nighttime
shift, his pay fluctuates as a direct result of the hour he is
called upon to work. His compensation, by definition, varies with
respect to the particular hour without regard to whether that hour
is spent productively or idly. Thus, any underlying salary could
not be called "fixed" with respect to "whatever hours he is called
upon to work," as required under section 778.114.
On the other hand, when an employee is paid a bonus for
executing a large number of sales, his pay fluctuates as a direct
result of those sales. The relative ease with which the sales are
made may be incidentally related to the hours worked in theory,
but not necessarily related in practice. This distinction matters.
An efficient employee may well make more sales during a "typically
slow" period than another employee may make during a "typically

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busy" period.5 Thus, to hold that a sales commission varies based
on the hours worked under section 778.114 would cramp the
regulation's language to fit a hypothetical state of affairs.6 The
point being that the time-based bonuses in O'Brien are readily
distinguishable from the performance-based bonuses here.
Nor are we alone in this assessment. Almost7 every court
to have considered whether the "fixed weekly salary" requirement
is breached "by paying an employee bonuses tied to performance
. . . [has] held, or stated, that, so long as the bonuses and
premiums [are] not tied to the number of hours worked by the
employee, they [are] consistent with that requirement." Wills,
                                                             5 Moreover, a "typically busy" period may end up unexpectedly slow, whereas a "typically slow" period may end up unexpectedly busy. 6 In common parlance, if an employee were promoted for taking unpopular hours, he might well be said to have been promoted "based on the hours he worked." On the other hand, if an employee were promoted for leading the team in sales, it would sound curious (or perhaps jilted) to say he was promoted "based on the hours he worked." 7 There is at least one not-so-notable exception. In West v. Verizon Servs. Corp., the district court held that an employer violated the FWW requirements because the plaintiff's hourly rate was below the minimum wage and because her hours did not fluctuate. No. 08 Civ. 1325, 2011 WL 208314, at *11 (M.D. Fla. Jan. 21, 2011). In dicta, the court then stated that plaintiff's "salary was not fixed because she had received various bonus payments and commissions." Id. The court offered no citations or analysis to support this proposition.

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981 F. Supp. 2d at 256-57 (citing Lance v. Scotts Co., No. 04 Civ.
5720, 2005 WL 1785315 (N.D. Ill. Jul. 21, 2005); Brantley v.
Inspectorate Am. Corp., 821 F. Supp. 2d 879 (S.D. Tex. 2011);
Soderberg v. Naturescape, Inc., No. 10 Civ. 3429, 2011 WL 11528148
(D. Minn. Nov. 3, 2011); Switzer, 2012 WL 3685978).
Meanwhile, "almost every court . . . ha[s] held that
paying an employee hours-based, or time-based, bonuses and
premiums—-such as extra pay for holiday, weekend, or night work—
offend[s] § 778.114's requirement of a 'fixed weekly salary.'"
Id. at 255-56 (citing Ayers v. SGS Control Servs., Inc. (Ayers
II), No. 03 Civ. 9078, 2007 WL 3171342 (S.D.N.Y. Oct. 9, 2007);
Brantley, 821 F. Supp. 2d 879; Brumley v. Camin Cargo Control,
Inc., No. 08 Civ. 1798, 2010 WL 1644066 (D.N.J. Apr. 22, 2010);
Adeva, 2010 WL 97991; Dooley v. Liberty Mut. Ins. Co., 369 F. Supp.
2d 81 (D. Mass. 2005); O'Brien, 350 F.3d 279). This reflects a
clear and well-reasoned distinction between the two forms of
compensation. Because Lalli's salary was not "based on the time
or type of work assignment," Brantley, 821 F. Supp. 2d at 890, and
Lalli's commissions were not tied to the hours worked, the instant
case falls within this persuasive line of authority.
Next, we turn our attention to Plaintiff's second
argument regarding section 778.114: the impact of the DOL's April

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2011 bulletin. In July 2008, the DOL proposed a change to section
778.114 that would have made it so "[p]ayment of overtime premiums
and other bonus and non-overtime premium payments will not
invalidate the 'fluctuating workweek' method of overtime payment
. . . ." 73 Fed. Reg. 43654, 43670 (July 28, 2008). In April
2011, the DOL rejected this proposal because it "believe[d] the
principles for including bonuses in the regular rate discussed in
other sections of the regulations [were] clear, [and it did] not
find that further clarifications or additional cross-references
[were] necessary in [§ 778.114]." 76 Fed. Reg. 18832, 18849 (Apr.
5, 2011). According to Plaintiff, this rejection shows that
section 778.114 is inapplicable whenever bonuses are included in
a pay scheme.
Plaintiff's invocation of the DOL bulletin fails for
the same reasons his invocation of O'Brien is left wanting. The
bulletin cites strictly to hours-based cases, employs hours-based
examples, and tailors its reasoning to concerns raised by hours
based bonuses and premiums. The bulletin offers no guidance
whatsoever on performance-based commissions.
With respect to case authority, the DOL suggests that
its rejection of the proposed change is consistent with the federal
courts' interpretation of the regulation. 76 Fed. Reg. at 18850.

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The cases cited for this proposition all deal with variations in
compensation by the number and type of hours worked. See id.
(citing O'Brien, 350 F.3d 279 (contractual overtime and night
shift pay); Adeva, 2010 WL 97991 (day-off pay, off-shore pay, and
holiday pay); Dooley, 369 F. Supp. 2d 81 (weekend pay); Ayers v.
SGS Control Servs., Inc. (Ayers I), No. 03 CIV. 9078, 2007 WL
646326 (S.D.N.Y. Feb. 27, 2007) (sea pay and day-off pay)). None
of the performance-based commission cases, on the other hand, were
directly cited or drawn into question. As such, the DOL's decision
to leave the regulation alone means that the bulletin would have
done nothing to change the federal courts' existing "treatment of
that precise issue." Wills, 981 F. Supp. 2d at 252.8
                                                             8 Some of the performance-based commission cases point out that the pay schemes at issue predated the DOL's April 2011 bulletin. See, e.g., Switzer, 2012 WL 3685978, at *4-5. This seems to us immaterial. The bulletin did not address performancebased bonuses and rejected proposed changes to the rule, thereby leaving the state of the law unchanged with respect to such commissions. See Wills, 981 F. Supp. 2d at 258 (noting that the pre-Final Ruling case law "is in fact quite relevant" because "[i]t shows how courts have interpreted the language of § 778.114, which, significantly, the Final Ruling left intact"). In short, the rule already prohibited the use of hours-based bonuses in conjunction with the FWW method and, contrariwise, already permitted the use of performance-based bonuses prior to the rejected proposal. Nothing changed. See 76 Fed. Reg. at 18850 ("The Department does not believe that it would be appropriate to expand the use of [the FWW] method of computing overtime pay beyond the scope of the current regulation. Accordingly, the final rule has been modified from the proposal to restore the current rule . . . .").

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If anything, the DOL bulletin indirectly approved of the
developing distinction between time-based and performance-based
bonuses. The bulletin cites Adeva among its list of cases showing
"that the courts have not been unduly challenged in applying the
current regulation to additional bonus and premium payments." 76
Fed. Reg. at 18850. In Adeva, the defendants attempted to rely
upon the Lance decision to support their hours-based bonuses, but
the court found the defendants' comparison to the commission case
"misplaced." Adeva, 2010 WL 97991, at *3 n.2 (citing Lance, 2005
WL 1785315). The Adeva court distinguished the holding in Lance,
noting that "[t]he case at bar does not deal with the payment of
commissions," and pointed out that "commission fluctuations are
permissible under DOL regulations" per sections 778.117 and
778.118.9 Id. Presumably, the DOL read the Adeva decision in full
before citing it with favor.
The language and reasoning of the bulletin further
confirm its sole focus on hours-based bonuses. The bulletin
                                                             9 The Lance decision dealt with a pay scheme involving both a salary component and a commissions component. 2005 WL 1785315, at *2. The court found that the plaintiff received a fixed salary, and that the fluctuations in commissions did not mean that the salary itself was not "fixed" for purposes of section 778.114. Id. at *4-7. Instead, the court pointed to sections 778.117 and 778.118 to show that such a method of calculating overtime pay was "specifically contemplated and authorized by the DOL." Id. at *6.

- 23 -
discusses bonuses "for certain activities such as working
undesirable hours," 76 Fed. Reg. at 18849 (emphasis added), and
raises the concern that shifting compensation into such bonus
payments could "potentially resul[t] in wide disparities in
employees' weekly pay depending on the particular hours worked,"
id. at 18850 (emphasis added). As discussed above, the
relationship between sales and "the particular hours worked" is
incidental at best, and we do not believe that the DOL would
consider "doing your job" to be an altogether different "activity"
than "doing your job well."
In sum, neither the O'Brien decision nor the DOL's April
2011 bulletin reach or answer the particular question posed here:
whether a compensation structure employing a fixed salary still
complies with section 778.114 when it includes additional,
variable performance-based commissions. We hold that it does.
Courts have almost uniformly distinguished between hours-based
bonuses and performance-based commissions in evaluating whether an
employee's compensation structure is permissible under section
778.114, and we join that line of reasoning today. In order for
the DOL to exclude such agreements from the regulation, it would
have to interpret section 778.114 contrary to almost every court

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to rule on this question,10 and it would have to ignore the plain
language of the adjacent regulations governing commissions, which
seem to specifically envision, and endorse, such agreements. We
do not think the DOL has interpreted, or would interpret, section
778.114 in such a manner, and we do not read section 778.114 to
impose any such restriction.

Outcome: GNC's pay scheme epitomizes the compensation arrangements illustrated in sections 778.114 and 778.118, and the mere combination of these two permissible methods does not render the former inapplicable. We need go no further based on the record before us. For the foregoing reasons, the judgment is AFFIRMED.

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