Fluctuating Workweek Method Doesn’t Cut It In PA
A judge from the United States District Court for the Eastern District of Pennsylvania recently issued a decision in Verderame v. RadioShack Corp., finding that the “fluctuating workweek” method of overtime compensation violates the Pennsylvania Minimum Wage Act (“PMWA“).
Q. What Is The Fluctuating Workweek Method?
Under this method, an employee receives a guaranteed fixed weekly salary for all straight-time earnings, regardless of the number of hours worked, and an additional one-half of the employee’s regular rate for all hours worked over forty in the workweek.
The employee’s regular rate may change from week to week, because it is based upon the employee’s actual hours worked.
The fluctuating workweek method is expressly permitted by the Fair Labor Standards Act’s regulations and used by employers to compensate non-exempt employees on a fixed salary basis while minimizing overtime costs.
Q. Why Does This Method of Determining Overtime Pay Not Hold Up In Pennsylvania?
“While this method of compensation may be lawful under the baseline federal regulation, the same cannot be said as it applies to the more employee-friendly Pennsylvania regulation,” said U.S. District Judge Mitchell Goldberg of the Eastern District of Pennsylvania.
Q. How Is The Fluctuating Workweek Method Different From How Overtime Pay Should Be Calculated In PA?
So, the judge explained, a worker making $600 per week who puts in 50 hours would be making $12 per hour. According to the fluctuating workweek method, he would be paid $12 per hour for the first 40 hours and then time-and-a-half, or $18, for the last 10 hours, which would give him a paycheck for $660.
However, the Pennsylvania Minimum Wage Act requires a different calculation, Judge Goldberg said. The state wage law requires employers to pay salaried workers at least one-and-a-half times their regular hourly rate for overtime work. Applying that calculation to the $600, 50-hour workweek example, Judge Goldberg explained that the employee would be paid at a rate of $12 per hour for 50 hours for a total of $600, then the hourly rate would be multiplied by one-and-a-half, or $18, which is to be paid as a premium for every hour worked beyond the first 40. The total would be $780.
Q. What Does This Mean For Employers?
The Verderame decision highlights the fact that the requirements of the FLSA and the PMWA are different and employers are not protected if they fail to comply with both laws.
The Verderame decision has increased the potential value of overtime misclassification cases, providing yet another reason for employers to conduct wage and hour audits and ensure that all employees are properly classified for overtime purposes. To learn more about wage and hour requirements, please contact the law office of Deborah Krull at 610-627-1010.