# United States: Pennsylvania Supreme Court To Decide Overtime Formula For Nonexempt Salaried Employees With Flexible Workweeks

The Pennsylvania Supreme Court agreed to hear an appeal of the lower court's decision in Chevalier v. Gen Nutrition Ctrs., 117 A.3d 280 (Pa. Super. 2017), which held that the Pennsylvania's Minimum Wage Act did not permit employers to calculate a nonexempt, salaried employees' overtime pay using the federal Fair Labor Standards Act's ("FLSA") flexible workweek model. The Supreme Court's decision will significantly impact how employers pay overtime to salaried employees in Pennsylvania, so employers should track future developments.

Under the FLSA's "flexible workweek model," employers are permitted to calculate the "regular rate" of overtime pay for certain nonexempt, salaried employees based on the actual number of hours worked above 40 hours. 29 C.F.R. § 778.114(a); Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942). The rationale behind the flexible workweek is to permit employers to pay nonexempt employees on a salary basis so that they are paid the same weekly amount regardless of the number of hours they work above or below 40 hours a week. Because the employee's salary already compensates the employee for the "straight time" for all hours worked over 40 hours, under the flexible workweek model, employers only have to pay overtime at a rate of one half (.5) of the regular rate for every overtime hour the employee works over 40 in a workweek. Therefore, under the flexible workweek model, the regular rate changes every week depending on the number of hours worked – the more hours the employee works in a given workweek, the lower his/her overtime hourly rate becomes. The following examples illustrate the flexible workweek model as compared to standard overtime calculations:

1. Standard Overtime Calculation: Using the standard model for overtime rate calculation, the overtime pay for a salaried employee making \$1,000 per week for 50 hours of work should be calculated as follows:

1. \$1,000/40 hours = \$25/hr. This represents the regular rate for calculating overtime pay.
2. \$25/hr * 1.5 = \$37.50/hr. This represents the regular rate, times 1.5, which is the amount the employee is entitled to earn for every hour of overtime worked over 40 hours in a workweek.
3. \$37.50/hr * 10 hours (actual hours worked in the workweek – 40 hours) = \$375. This represents the total overtime pay for the 50 hour workweek.
4. \$1,000 + \$375 = \$1,375. This represents the employee's salary and overtime pay for a 50 hour workweek.

2. FLSA Flexible Workweek Model: Under the FLSA's flexible workweek model, if a salaried employee makes \$1,000 per week and works 50 hours per week, the employee's overtime pay is calculated as follows:

1. \$1,000/50 hours = \$20/hr. This represents the regular rate for calculating overtime pay.
2. \$20/hr * .5 = \$10/hr. This represents the regular rate, times one half, which is the amount the employee is entitled to earn for every hour worked over 40 hours.
3. \$10/hr * 10 hours (actual hours worked in the workweek – 40 hours) = \$100. This represents the total overtime pay for the 50 hour workweek.
4. \$1,000 + \$100 = \$1,100. This represents the employee's salary and overtime pay for a 50 hour workweek.

The regular rate changes depending on the number of hours worked. Using this example, if the employee worked only 45 hours in a week, the regular rate would be \$22.22, the employee could earn \$11.11 per hour of overtime worked, and the employee would be entitled to \$55.56 for five hours of overtime.

The net result is that under the flexible workweek model above, employers are permitted to pay qualifying nonexempt salaried employees less than 1.5 times all hours worked over 40 in a workweek.

In the Chevalier case, the employer argued that the Pennsylvania's Minimum Wage Act ("PMWA") authorizes employers to calculate salaried employees' overtime pay based on the FLSA's flexible workweek model. Conversely, the employees argued that the PMWA required that the employer calculate the employee's regular rate based on the standard overtime calculation. The employees also argued that salaried employees are entitled to one and a half time the regular rate for all hours worked over 40 in the workweek.

In its decision, the Superior Court split the difference between the two calculations. First, it agreed with the employer, holding that under the PMWA and the FLSA, the employer may base the regular rate for salaried employees' overtime pay on the actual number of hours worked as opposed to using 40 hours. (see FLSA Flexible Workweek Model, step A, above). The Court noted that the PMWA, which was enacted after the FLSA, mimics the FLSA's provision calculating overtime based on a "regular rate." 34 Pa. Code §§ 231.43(a). Under this method, the regular rate fluctuates every week depending on number of overtime hours worked. This method results in a lower regular rate than used in the standard overtime calculation (see Standard Overtime Calculation, step A, above).

Next, the Superior Court agreed with the employees that under the PMWA, overtime pay must be based on one and a half (1.5) times the regular rate of hours worked over 40 hours per week. (see Standard Overtime Calculation, step B, above). The Superior Court reasoned that the PMWA expressly provides that "employees shall be paid for overtime not less than one and onehalf times the employee's regular rate," and therefore, the PMWA did not specifically adopt the FLSA's provision allowing the lower one half (0.5) multiplier when calculating overtime pay for nonexempt salaried employees. See 43 P.S. 333.104(c); 29 C.F.R. § 778.114(a). The Superior Court held that the employer violated the PMWA because it did not pay employees one and half (1.5) times the regular rate of pay for all hours over 40 hours worked in a week. The example below illustrates the Superior Court's hybrid calculation of the overtime rate for nonexempt, salaried employees working bona fide fluctuating workweeks:

3. Superior Court's Hybrid Formula: Under the Chevalier decision, overtime pay for a salaried employee making \$1,000 per week and working a 50 hour workweek should be calculated as follows under the PMWA:

1. \$1,000/50 hours = \$20/hr. This represents the regular rate for calculating overtime pay.
2. \$20 /hr* 1.5 = \$30/hr. This represents the regular rate, times 1.5 , which is the amount the employee is entitled to earn for every hour of overtime worked.
3. \$30/hr * 10 hours (actual hours worked in the workweek – 40 hours) = \$300. This represents the total overtime pay for the 50 hour workweek.
4. \$1,000 + \$300 = \$1,300. This represents the employee's salary and overtime pay for a 50 hour workweek.

Under the PMWA and the FLSA, employers may calculate the regular rate based on the actual number of hours worked in a workweek. This method of calculation can be more difficult to administer because the regular rate changes each workweek, however, if properly administrated, allows employers to pay a lower regular rate.

### Significance For Employers

The Superior Court's holding requires that employers pay qualifying nonexempt employees according to its hybrid formula. The Pennsylvania Supreme Court will likely address which of the three calculations apply, or if another calculation is required under the PMWA. Until the Pennsylvania Supreme Court decides the issue, employers will be left in limbo regarding the correct formula to use. Until that time, employers should carefully assess, with legal counsel, the risks and rewards for using the FMLA's flexible workweek formula in Pennsylvania.

To print this article, all you need is to be registered on Mondaq.com.

Authors
Similar Articles
Littler Mendelson
Masuda, Funai, Eifert & Mitchell, Ltd.
Fisher Phillips LLP
Farella Braun & Martel
Littler Mendelson

In association with
Related Topics

Similar Articles
Littler Mendelson
Masuda, Funai, Eifert & Mitchell, Ltd.
Fisher Phillips LLP
Farella Braun & Martel
Littler Mendelson
Related Articles

Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels

|
|
© Mondaq® Ltd 1994 - 2018

Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).

Company Name
Position
Mondaq Topics -- Select your Interests
Accounting
Anti-trust
Commercial
Compliance
Consumer
Criminal
Employment
Energy
Environment
Family
Finance
Government
Healthcare
Immigration
Insolvency
Insurance
International
IP
Law Performance
Law Practice
Litigation
Media & IT
Privacy
Real Estate
Strategy
Tax
Technology
Transport
Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

• To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
• To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
• To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

### Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

### Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

### Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

### General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions