The Pennsylvania Superior Court recently resolved a case regarding the method of calculating overtime compensation under the Pennsylvania Minimum Wage Act (PMWA). In Chevalier v. Gen. Nutrition Centers, Inc., 177 A.3d 280 (Pa. Super. Ct. 2017) employees filed a class action against General Nutritional Centers (GNC) for unpaid overtime, specifically that GNC’s method of calculating overtime violated the PMWA. The PMWA provides that employees must be paid overtime at not less than 1½ times their regular rate for every hour worked over 40 in a workweek.
GNC calculated overtime compensation using the fluctuating workweek method (FWW). The FWW determines an employee’s “regular rate” of compensation for the workweek by dividing each employee’s pay by the number of hours the employee worked during the workweek. Therefore, employees’ regular rates fluctuated each week. GNC then paid employees at one-half of their regular rate for each hour of overtime worked. The employees argued that, (1) an employee’s regular rate should have been calculated using a fixed 40-hour workweek, not the fluctuating workweek method, and (2) the overtime pay should have been 1½ times their regular rate for each hour of overtime instead of one-half their regular rate
The Superior Court found that using the FWW to calculate an employee’s regular rate did not violate the PMWA, however, paying overtime of only one-half the regular rate did violate the PMWA. In support of the FWW not violating the PMWA the court mentioned that the Pennsylvania Generally Assembly borrowed the term “regular rate” from the Fair Labor Standards Act, which permitted the FWW method of calculation when the PMWA was enacted. In support of paying overtime of one-half the regular rate violating the PMWA the court cited a Pennsylvania regulation requiring employers to pay employees not less than 1½ times their regular rate of pay for all hours exceeding the 40 hours threshold. In conclusion, the FWW is permissible under the PMWA, however overtime must still be paid at 1½ times the employee’s regular rate.