Bed Bath & Beyond store in Manhattan (photo: Michael Nagle/Bloomberg)

The U.S. Court of Appeals for the Second Circuit on Monday upheld the dismissal of a lawsuit from current and former employees of Bed Bath & Beyond who claimed that the home-goods retailer had failed to pay them the correct overtime rate.

The ruling, from a three-judge panel of the Manhattan-based federal appeals court, upheld a lower court's decision to toss the case on summary judgment, finding insufficient evidence to support the plaintiffs' claims regarding Bed Bath & Beyond's use of a "fluctuating workweek" formula to compensate employees for overtime hours.

The Second Circuit held that six weeks' worth of the workers' pay stubs showing that they had received less than their normal wages was not enough to raise a genuine factual dispute in the case.

The panel's ruling also rejected claims that the fluctuating workweek method requires weekly schedules to alternate above and below a nonovertime limit of 40 hours per week and that employers were barred from forcing employees to work on holidays or previously scheduled days off on the promise that they would be able to take time at a later date.

The suit was filed under Section 207 of the Fair Labor Standards Act, which caps nonexempt employees' nonovertime hours and requires employers to pay as overtime compensation at one and a half times their regular rates.

Congress has not codified the fluctuating workweek method in the FLSA, but the U.S. Supreme Court has recognized the formula in a pair of 1942 decisions. Under the fluctuating workweek method, an employer may, under certain conditions, pay an employee who works fluctuating hours a fixed salary for all hours worked, plus an additional half-time for work exceeding 40 hours per week, though that number decreases with the amount of hours worked.

The Second Circuit panel said Monday that the plaintiffs, a group of department managers at Bed Bath & Beyond stores, had pointed to just six instances where the company had failed to pay them their fixed and guaranteed weekly wages as a result of its policy for paying overtime.

Two of those payroll errors, the panel said, were corrected before the workers' lawsuit in October 2016, while two other minor infractions were "not cause for alarm." The two remaining discrepancies, involving unpaid wages for vacation and family and medical leave, required "more attention," but still did not establish a genuine dispute of material fact on summary judgment.

"With a different record, the absence of weeks with fewer than 40 hours of actual work and credited paid time off in which full pay was given might well weigh heavily in our analysis," Second Circuit Judge Guido Calabresi wrote in a 34-page opinion on behalf of the panel.

"Here, however, we view as salient that the two more puzzling instances of alleged underpayment bear no connection to each other or to the other four disputed weeks," he said.

Calabresi was joined in the ruling by Judges Barrington D. Parker Jr. and Debra Ann Livingston.

James Murphy, who represented the plaintiffs, said in a statement that his clients were still in the process of "evaluating their options in this matter."

"We hope that the Legislature recognizes that this loophole encourages employers to exploit workers by paying ever-decreasing rates for overtime work, and works to rectify this injustice going forward," said Murphy, a partner with Virginia & Ambinder in Manhattan.

Jonathan Sulds, a Greenberg Traurig partner who represents Bed Bath & Beyond, declined to comment on Monday, citing the company's policy against publicly discussing pending litigation.

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