In September 2012, we reported on two decisions from the United States District Court for the Western District of Pennsylvania holding that the "fluctuating workweek" method of calculating overtime is not lawful under Pennsylvania law when the employer pays an overtime premium of one-half of the employee's regular hourly rate, in addition to the employee's salary. Foster v. Kraft Foods Global, Inc., 2012 U.S. Dist. LEXIS 121282 (W.D. Pa. Aug. 27, 2012); Cerutti v. Frito Lay, Inc., 777 F. Supp. 2d 920 (W.D. Pa. 2011). Last week, a judge from the Eastern District of Pennsylvania followed in the footsteps of Foster and Cerutti. While Verderame v. RadioShack Corp., Case 2:13-cv-02539 (E.D. Pa. July 10, 2014), did not break any new ground in its analysis, the fact that the court followed Foster and Cerutti should be of great concern to Pennsylvania employers who continue to use this method of calculating overtime that is lawful under the FLSA. Of course, these three federal court decisions are not binding on the state courts, which will have the final say on the matter.
As previously reported, these decisions overlook that while the Pennsylvania Code does not include language specifically tracking the FLSA's fluctuating workweek provision, it does authorize employers and employees to reach an "agreement or understanding" about how to achieve "time and a half" overtime compensation. In our view, these decisions incorrectly perceived that the fluctuating workweek is a "half-time exception" to "time and a half" overtime compensation, rather than a method of achieving "time and a half" overtime compensation. Moreover, while the Pennsylvania Code does not track the FLSA's fluctuating workweek provision, it does include language generally tracking 29 USC § 207(g)(3) and 29 CFR Part 548, which would allow employers to adopt a fluctuating workweek compensation plan.
While it is our view that these cases were wrongly decided, employers should take note of the risks associated with continuing to utilize the fluctuating workweek in Pennsylvania in light of these decisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.