A section 7(f) guaranty contract has an absolute ceiling: the guaranteed pay may not cover more than 60 hours in a workweek, though the contract is free to guarantee pay for fewer hours than that. Staying under 60 hours is not enough on its own, however — the number of hours the contract guarantees must bear a reasonable relation to the number of hours the employee may actually be expected to work. A contract guaranteeing 60 hours to an employee whose irregular duties can reasonably be expected to range no higher than 50 hours would not qualify: the rate specified in such a contract would be “wholly fictitious,” and a “wholly fictitious” rate is not a regular rate at all. Parties negotiating the contract should work out, as far as they can, the range of hours the employee is likely to work. They should then pick a guaranty low enough that the stipulated rate will actually be operative — will actually control the employee’s pay — in a significant number of workweeks, rather than a guaranty pegged to the employee’s maximum possible hours. Periodic review of how the contract actually operates lets the employer check whether the rate is still doing that job or whether the contract needs adjusting.

The guaranty also has to be arithmetically honest: it must be based on the regular and overtime rates the contract itself specifies, not a round number chosen for its own sake. If a contract sets a $5 regular rate and a $7.50 overtime rate, guarantees pay for 50 hours, and the applicable maximum hours standard is 40 — the Act’s general nonovertime ceiling on the workweek under § 778.101, or whatever different standard applies to a given employee — the guaranty must equal $275, or 40 hours at $5 plus 10 hours at $7.50, to be based on those specified rates; a guaranty of $290 in the same contract would not be. The same logic rules out folding other kinds of pay into one flat guaranteed figure: a contract that adds shift differentials, hazardous-work pay, stand-by time, piece-rate incentive bonuses, or commissions on top of the specified regular and overtime rates, then guarantees a single lump sum covering all of it, does not qualify, because that lump sum is no longer based on the rates the contract specifies.

Nothing requires the Secretary of Labor or the Wage and Hour Administrator to approve a section 7(f) contract before it takes effect. Whether a given contract actually qualifies is a question for the courts, and they look past the contract’s wording to how the parties actually operate under it: whether the employee’s duties really do necessitate irregular hours, whether the contract’s rate was designed to actually govern pay, whether the parties entered the contract in good faith, and whether the guaranty is in fact based on the specified rates. The Wage and Hour Administrator can issue an advisory opinion on a proposed arrangement, but only once given the facts needed to judge it. Section 7(f) is only an exception to how section 7(a) overtime pay is computed for hours above the applicable maximum hours standard — it does not exempt the employer from section 6’s minimum wage requirements, so both sections apply concurrently to an employee working under such a contract. Because the contract’s actual operation is what counts, an employer covered by both section 6 and section 7(f) must keep payroll records of the total weekly guaranteed earnings, the total weekly compensation paid above that guaranty, and a copy of the individual contract or bargained agreement itself — or, if it was never put in writing, a written memorandum summarizing its terms.