Wednesday, December 11, 2019

SCOPA: Fluctuating Work Week method of overtime pay does not comply with PA Minimum Wage Act

How do simple concepts get so complicated? Both the federal Fair Labor Standards Act (FLSA) and the Pennsylvania Minimum Wage Act (PMWA) require employers to pay non-exempt employees time-and-a-half for hours over 40 worked in a workweek. So, if an employee makes $10/hour and works 50 hours, they get $550: $400 ($10 * 40 hours) + $150 ($15 * 10 hours). Easy, right?

But, wait! What about non-exempt employees who earn a salary? First, you need to calculate their regular rate, by taking their weekly salary and dividing it by the number of hours worked. For salaried employees, the regular rate will therefore vary depending on how many hours they worked that week. Now, the big question - how much do they get for overtime?

Under the FLSA, it is very clear that the employee's salary covers the base amount of regular pay for all hours worked. The employer must only pay the employer the extra 50% of the regular rate for hours over 40. There's a regula29 CFR § 778.114:
tion directly on point,
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).
In other words, the employer must pay the regular salary and then add the regular rate, times a multiplier of 0.5, times the number of hours over 40 worked in the workweek. We call this the "Fluctuating Work Week (FWW)" method. 

Unfortunately, Pennsylvania has no such regulation addressing the FWW. In Chevalier v. General Nutrition Centers, Inc., the Pennsylvania Supreme Court held that the FWW method does not comply with the PMWA. Instead, employers must use a multiplier of 1.5. 

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