Wednesday, January 9, 2013

Fluctuating Workweek Under Pennsylvania Law

Jane Lewis Volk, Esquire
Employers who are currently utilizing the “fluctuating workweek” method of paying for overtime, take notice.  The Federal District Court here in Pittsburgh issued a decision on August 27, 2012, ruling that this method, approved under the federal Fair Labor Standards Act (“FLSA”), violates the Pennsylvania Minimum Wage Act (“PMWA”).

The fluctuating workweek method, recognized under federal law for decades, permits an employer to pay their non-exempt employees a fixed weekly salary, regardless of the number of hours worked and to calculate overtime obligations in a unique manner.  Each week the salary is divided by the number of hours actually worked to determine that week’s “regular” rate of pay.  Because that payment method already includes payment for hours worked in excess of 40 (when more than 40 are worked), overtime payments can then be at one- half, rather than one and one-half, of the “regular rate.”  To be legal, this arrangement must be pursuant to an agreement between the employer and employee at the outset. 

While the PMWA mirrors the FLSA in many respects, the two laws are not identical and neither pre-empts the other; Pennsylvania employers must comply with both.  The regulations promulgated under the PMWA do not permit the fluctuating workweek method unless wages are paid on a per-day or per-job basis, which was not the case in the recent federal court decision.  Under the PMWA, the overtime rate must be “not less than 1-1/2 times the regular rate.”   

While this federal court case is still ongoing and while District Court decisions are not controlling precedent, this decision is a well-reasoned one, is consistent with an earlier District Court decision and is consistent with the Pennsylvania regulations.  The Pennsylvania appellate courts have not addressed the issue.

Employers who utilize the fluctuating workweek method should reexamine their practices and all employers are reminded that their employment practices must measure up to both federal and state law. 

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