Proposed Legislation To Reverse Court Decision, Permit Pennsylvania Health Care Institutions to Rely on 8/80 Overtime Method
[Update: On July 5, 2012, Governor Corbett signed House Bill 1820 into law. The amendments to the PMWA permitting the use of the 8/80 method by health care institutions in the Commonwealth become effective immediately.]
The federal Fair Labor Standards Act (“FLSA”) imposes a general requirement that employers pay overtime to non-exempt employees for hours worked in excess of 40 hours per workweek. Section 7(j) of FLSA provides, however, that certain employers in the health care industry can rely on the “8/80” method of overtime calculation instead of the standard 40 hour workweek approach.
Under the 8/80 method, hospitals, nursing homes, and other medical institutions that provide residential care can pay non-exempt employees overtime for hours worked in excess of 8 hours per day or 80 hours per 14-day period. Prior to implementing the 8/80 arrangement, the health care institution must reach an agreement or understanding with its employees regarding application of the 8/80 rule.
Prior to 2010, health care institutions in Pennsylvania had a long history of relying on the FLSA’s 8/80 method. In March 2010, however, the Philadelphia Court of Common Pleas ruled that the FLSA’s 8/80 rule conflicted with the Pennsylvania Minimum Wage Act (“PMWA”). Specifically, in Turner v. Mercy Health System, the court held that because the PMWA does not explicitly provide for the 8/80 overtime payment method, the 8/80 rule is not valid under Pennsylvania’s wage and hour laws. According to the court, therefore, healthcare employers in Pennsylvania could not rely on the 8/80 method, but were required to comply with the PMWA’s strict 40 hours per workweek overtime requirement.
While the court’s decision had no binding effect outside of Philadelphia County, many Pennsylvania health care employers were concerned that the decision would lead to a flood of class action lawsuits across the state. Accordingly, many have phased out the 8/80 method in favor of the standard 40 hour workweek approach, or contemplated doing so.
On June 28, 2012, Pennsylvania Governor Tom Corbett was presented with legislation, seemingly in response to the court’s decision in Turner, that would amend the PMWA to permit use of the 8/80 method by health care institutions in the Commonwealth. (pdf) Specifically, the bill would amend Section 4(c) of the PMWA to provide that an employer shall not be in violation of its obligation to pay overtime under the PMWA “if the employer is entitled to utilize, and acts consistently with, Section 7(j) of the Fair Labor Standards Act … and regulations promulgated under that provision.”
If enacted, Pennsylvania health care employers will again have the option to calculate their overtime obligations under either the standard 40 hour approach or the FLSA’s 8/80 system. Governor Corbett is expected to sign the bill early this month.
This post highlights just one of the differences that exists between federal and state wage and hour laws. Similarly, wage and hour laws frequently differ between states and across industries. Employers must be aware of these differences and ensure compliance with all relevant laws. The Labor and Employment Group at McNees Wallace & Nurick can assist you in developing wage and hour practices that are in full compliance with the federal and state laws that govern your operations and are particular to your industry.