The Pennsylvania Supreme Court Has Rejected the Fluctuating Workweek Method of Overtime Compensation
In November 2019, the Supreme Court of Pennsylvania rejected the federal Fair Labor Standards Act’s (“FLSA”) method of calculating overtime for fluctuating workweeks in favor of the more stringent method required by the Pennsylvania Minimum Wage Act (“PMWA”). Although both laws were applicable in the case, there was a question of which standard applied to overtime pay due to a gap in Pennsylvania’s fluctuating workweek statute which did not directly address overtime pay in these situations.
The fluctuating workweek, which was explained in depth in an earlier NSSH article,[1] is a mechanism which allows an employee to receive a regular paycheck despite irregular hours worked per week. Basically, the fluctuating workweek must be agreed upon by both employer and employee for a job which regularly fluctuates around 40 hours per week. The typical example is a landscaper who may have fewer hours during weeks with lots of rain, but longer hours during fair weather weeks. This type of employee would be able to receive a set paycheck for each pay period regardless of small fluctuations allowing for him or her to better plan financially for expenses. The fluctuating workweek does not excuse an employer from paying the minimum wage, but did previously allow an employer to reduce overtime pay due on the weeks fluctuating over 40 hours, creating what seemed to be a win-win for both parties. The reduced overtime pay due, however, turned out to be more problematic than expected for some states—like Pennsylvania.
Chevalier v. GNC, Inc.,[2] was a dispute where a GNC employee felt that her overtime pay as calculated according to the federal FLSA rate of 0.5 times the regular wage for her fluctuating workweek was improper. Instead, she (and other plaintiffs in the class) contended that Pennsylvania’s PMWA was the proper standard since it imposes a higher rate of 1.5 times the existing regular wage for her fluctuating workweek. GNC argued that Pennsylvania adopted the fluctuating workweek from the FLSA, so why would it not also adopt the fluctuating workweek overtime rate from the FLSA?
Both parties stated that since the Pennsylvania Secretary of Labor and Industry had not expressly legislated the rate, it was proper to adopt their respective arguments. Plaintiffs’ argued that the lack of express adoption by the Secretary of the lower FLSA rate meant that the higher PMWA rate was intended to be used and the FLSA rate specifically excluded. GNC argued that the adoption of the FLSA fluctuating workweek should be construed in conjunction with the similar FLSA overtime rate in the absence of its specific adoption, stating that the intention was to take the entire federal fluctuating workweek statute, not portions of it, and noting the lack of specific intent to the contrary.
In the end, the Court agreed with Plaintiffs and cited a specific Pennsylvania statute, 43 P.S. § 333.104(c) as conclusive. This statute provides that “employees shall be paid for overtime not less than one and one-half times the employee’s regular rate.” Since both parties agreed that the regular rate was calculated by taking the fluctuating workweek wage divided by the hours worked, the court reasoned that any hours worked over 40 must be compensated on top of the regular rate, at a rate of at least 1.5 times the regular rate. For this reason, the Court found GNC’s argument untenable.
The Court also cited policy reasons for its decision, explaining that the unmistakable intent of the Pennsylvania legislature in enacting such overtime provisions was to combat the evils of unreasonable and unfair wages. The Court explained that individual states have the authority to enact laws that are more beneficial to employees than the FLSA—indeed other states have done the same.[3] Commonly, overtime is thought to incentivize employers to hire another worker, rather than pay higher rates for the same worker to perform more than 40 hours of work in a workweek increasing employment.
The result requires employers in Pennsylvania currently using the fluctuating workweek to review and revise the way they handle overtime payments. The Chevalier decision has immediate repercussions for businesses using a fluctuating workweek, which should reach out to their employment attorneys to ensure compliance with Pennsylvania’s minimum wage laws.
[1] https://www.nssh.com/2019/08/what-is-a-fluctuating-workweek-and-can-employers-use-it-in-pennsylvania/
[2] Chevalier v. General Nutrition Centers, Inc., 220 A.3d 1038 (Pa. 2019).
[3] Alaska, California, and New Mexico have rejected the FLSA fluctuating workweek overtime rate as well.