The Pennsylvania Supreme Court Bars the Use of the Fluctuating Workweek Method to Calculate Overtime Pay Under the Pennsylvania Minimum Wage Act
Pennsylvania (January 2, 2020) - As employers are aware, the FLSA requires the payment of a minimum wage for all hours worked and overtime for hours worked in excess of 40 hours per week. Pursuant to the FLSA, employers may utilize the fluctuating workweek method to calculate overtime compensation when a non-exempt employee receives a fixed weekly salary but works hours that varies from week to week. In those instances, an employer satisfies the overtime requirement of the FLSA if the employer pays the weekly salary and at least one half of the employee’s regular pay rate for hours in excess of 40 hours per week. However, in Chevalier v. General Nutrition Centers, Inc., the Pennsylvania Supreme Court held the fluctuating work week method is not a proper manner to calculate overtime pay for purposes of the Pennsylvania Minimum Wage Act.
The Chevalier case arose out of a class action lawsuit that was filed on behalf of General Nutrition Center (GNC) store managers, who were paid a set weekly salary plus commissions regardless of the number of hours the managers worked in a week. GNC also paid overtime for hours worked over 40 hours in a week by using the fluctuating workweek method. The plaintiffs argued that GNC’s use of the fluctuating workweek method failed to satisfy the Pennsylvania Minimum Wage Act’s requirement that an employee shall be paid not less than one and one half times the employee’s regular pay rate for overtime. The trial court accepted the plaintiff’s position and granted summary judgment to plaintiffs, holding that the fluctuating workweek method violated the Pennsylvania Minimum Wage Act. The Pennsylvania Superior Court subsequently upheld the trial court’s decision.
On appeal to the Pennsylvania Supreme Court, GNC requested that the court interpret the Pennsylvania Minimum Wage Act consistent with the FLSA, which permits the use of the fluctuating workweek method. However, the Pennsylvania Supreme Court focused on the specific language of the Pennsylvania Minimum Wage Act, which requires the payment of one and one-half times an employee’s regular rate of pay for overtime. As such, the court concluded that the rules of statutory construction favored the plaintiffs’ interpretation that the 1.5, rather than .5, multiplier was required for the payment of overtime wages.
The Pennsylvania State Senate Proposes to Increase the Pennsylvania Minimum Wage
The Pennsylvania State Senate passed a bill to increase the Pennsylvania minimum wage, which is presently $7.50, to $9.50 per hour by 2022. The proposed increase would take effect as follows:
July 1, 2020 - $8.00 per hour
January 1, 2021- $8.50 per hour
July 1, 2021- $9.00 per hour
January 1, 2022- $9.50 per hour
It is likely the Pennsylvania House of Representatives will also pass the bill and it will then be signed by Governor Wolf. As a result, employers should prepare for an increase in the minimum wage in the near future.
Pittsburgh Paid Sick Day Act
The Pittsburgh Paid Sick Day Act is set to take effect on March 15, 2020. The new law provides that private employers with 15 or more employees must provide employees with at least 1 hour of sick time for every 35 hours worked up to 40 hours per year. If an employer has less than 15 employees, the employer must provide 1 hour of sick time for every 35 hours worked up to a total of 24 hours per year. In the case of employers with less than 15 employees, the sick time may be unpaid until March 15, 2021. However, any time accrued after March 15, 2021 must be paid.
Employers are prohibited from discriminating or retaliating against employees who exercise their rights under the law. Further, employers may be fined for violations of the law and Pittsburgh may seek restitution for employees who suffer lost wages and benefits, in addition to reinstatement.
Implementation of the Philadelphia Fair Workweek Ordinance
The Philadelphia Fair Workweek Employment Standards Ordinance (Ordinance), which establishes work scheduling and pay requirements for certain employers in the retail, hospitality, and food service industry took effect on January 1, 2020.
The Ordinance applies to retail, hospitality, and food service establishments operating in the city of Philadelphia with 250 or more employees, regardless of where the employees work, and 30 or more locations worldwide. The Ordinance covers all employees who are non-exempt under either state or federal law, including full-time, part-time, and seasonal or temporary employees. For employees covered by a collective bargaining agreement, the provisions of the Ordinance can be waived by the inclusion of a clear waiver in the agreement.
When an employee is hired, an employer must provide the employee with a written, good faith estimate of the employee’s work schedule, which must contain the average number of hours the employee can be expected to work, including whether the employee can expect to work any on-call shifts. An employee is entitled to make work schedule requests, including requests not to work shifts during certain days or at certain locations, requests not to work on-call shifts, and requests for certain hours, days, or work locations.
From January 1, 2020, through December 31, 2020, employers must provide employees with a written work schedule at least 10 days before the schedule begins. Beginning January 1, 2021, employers must provide 14 days’ notice of the work schedule. Additionally, employers must provide notice of any proposed changes to the schedule prior to the change taking effect and the written schedule must be revised within 24 hours.
If an employer changes the schedule after the required notice period, the employer must pay the employee Predictability Pay above the employee’s regular pay. For example, an employee is entitled to one hour of Predictability Pay, at the employee’s regular rate of pay, if additional time is added to a work shift or the date, time, or location of a work shift is changed with no loss of hours. An employee is entitled to Predictability Pay at half of the employee’s regular hourly rate for any scheduled hours the employee does not work if hours are subtracted from a regular or on-call shift or a regular or on-call shift is cancelled.
There are numerous exceptions to the Predictability Pay requirement for instances in which a schedule change occurs for reasons beyond an employer’s control, including when an employee requests a shift change in writing; severe weather disrupts public transportation or poses a threat to employee safety; a state of emergency, such as a fire, flood or natural disaster; and threats to employees or the employer’s property. Additionally, Predictability Pay is not required when hours are subtracted from an employee’s schedule for disciplinary reasons due to a multi-day suspension, provided the incident leading to the disciplinary action is documented.
The Ordinance further provides that an employee may decline, without being penalized, any work hours that are scheduled or occur less than nine hours after the end of the previous day’s shift or during the nine-hour period following the end of a shift that spanned two days. If an employee agrees to work under such circumstances, the employee must provide written consent and the employer must pay the employee an additional $40.00 for the shift.
Significantly, the Ordinance provides that it is illegal for an employer to interfere with an employee’s attempt to exercise any rights granted by the Ordinance. Further, an employer may not take any retaliatory action against an employee as a result of the employee’s exercise of any of those rights. In that regard, there is a rebuttable presumption of retaliation if an employer takes any adverse action against an employee within 90 days of the employee’s exercise of any rights under the law, unless the adverse action is due to disciplinary reasons, which must be documented in writing.
The Ordinance provides an employee may either file a complaint with an agency designated by the Mayor to administer and enforce the law or file a complaint in court regarding an alleged violation of the law. If the employee prevails in such an action, the employee shall receive the full amount of any unpaid compensation, including Predictability Pay, any lost wages and benefits, presumed damages, which will be determined by the agency, and an amount up to a maximum of $2,000.00 as liquidated damaged. Additionally, the employee will be entitled to an award of attorneys’ fees and costs. Additionally, an employer can be subjected to penalties and fines for violations of the Ordinance.
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