By Allison L. Feldstein and Jessica L. Meller

In a recent case, the Pennsylvania Superior Court settled a novel question regarding the appropriate method for calculating overtime compensation under the Pennsylvania Minimum Wage Act (PMWA).

Chevalier v. General Nutrition Centers, Inc. and General Nutrition Corporation involved a class action that GNC employees initiated against the health and nutrition company for unpaid overtime. In their complaint, they alleged that GNC's method of calculating overtime violated the PMWA and its regulations.

Background

Interestingly, the PMWA is silent regarding the appropriate method for calculating overtime pay. 43 P.S. § 333.104(c) provides that employees must be paid overtime at not less than 1½ times their regular rate as prescribed by regulations promulgated by the Pennsylvania secretary of labor and industry.

The regulations provide little additional guidance. 34 Pa. Code § 231.41 states that employees must be paid not less than 1½ times their regular rate of pay for all hours worked over 40 in a workweek. 34 Pa. Code § 231.42 defines "workweek" as a period of 7 consecutive days starting on any day the employer selects.

To calculate employees' overtime compensation, GNC used the fluctuating workweek (FWW) method. Each week, GNC divided each employee's pay by the number of hours she worked during the 7-day period to determine her "regular rate" of compensation. As a result, employees' regular rates fluctuated each week. GNC then paid employees at one-half of their regular rate for each hour of overtime worked.

The employees argued that GNC should have calculated their regular rate using a fixed 40-hour workweek, not an FWW. Further, they argued that GNC should have paid them 1½ times their regular rate for each hour of overtime instead of one-half their regular rate.

Ruling

The superior court reversed parts of the trial court's opinion while affirming other parts. The trial court held that (1) using the FWW method to calculate the employees' regular rate violated the PMWA and (2) paying an overtime premium of one-half the employees' regular rate violated the PMWA and its regulations. The superior court held that using the FWW method of calculating the regular rate did not violate the PMWA, while paying an overtime premium of only one-half the regular rate did violate the law.

In reaching its decision, the superior court noted that the plain statutory language of the PMWA could support either side's interpretation of "regular rate." It also acknowledged that the Pennsylvania General Assembly borrowed the term "regular rate" from the Fair Labor Standards Act (FLSA), which permitted using the FWW method to calculate employees' regular rate when the PMWA was enacted.

Further, the court noted that the general assembly chose to deviate from the FLSA in certain instances, but not regarding the definition of "regular rate." Finally, the court cited several Pennsylvania federal court cases that supported its position.

Although the court held that using the FWW method did not violate the PMWA, GNC paying overtime of only one-half of employees' regular rate did. The court cited a Pennsylvania regulation requiring employers to pay employees "not less than 1½ times [their] regular rate of pay for all hours in excess of 40 hours in a workweek."

Also, the court noted that the PMWA did not adopt the one-half multiple from the federal regulation to the FLSA, 29 C.F.R. § 778.114(a). That exclusion, the court decided, was intentional. The superior court sent the case back to the lower court for further proceedings.

Bottom Line

Calculating overtime can be a difficult task, especially for employers that have employees in several states. Although, in this case, the Superior Court accepted a PMWA interpretation consistent with the federal FLSA, Pennsylvania courts have not always interpreted the PMWA consistent with federal law.

In addition, other states' courts may also reach different conclusions. Because the risks of miscalculating overtime can be significant, to say the least, employers are encouraged to consult with their labor and employment counsel for guidance in interpreting the Pennsylvania Minimum Wage Act, other states' wage and hour laws, and the federal FLSA.

Allison Feldstein, an editor of Pennsylvania Employment Law Letter, can be reached at allison.feldstein@saul.com or 412-209-2533. Jessica L. Meller can be reached at jessica.meller@saul.com or 215-972-1987.