Federal Court Holds That FLSA's "Fluctuating Workweek" Method of Overtime Compensation Violates PA Law
This post was contributed by Adam R. Long, a Member in McNees Wallace and Nurick LLC's Labor and Employment Group.
In the wage and hour realm, even the most knowledgeable Pennsylvania employers often are unaware of potential compliance pitfalls presented by state law. Like the FLSA, the Pennsylvania Minimum Wage Act ("PMWA") contains overtime and minimum wage requirements applicable to Pennsylvania employers. The PMWA is similar, but not identical, to the FLSA, and compliance with the FLSA does not always guarantee compliance with this state law. For example, unlike the FLSA, the PMWA does not contain a specific overtime and minimum wage exemption for employees in computer-related occupations. Thus, a computer professional in Pennsylvania who safely falls within the FLSA exemption still may be entitled to overtime compensation pursuant to the PMWA. In other words, compliance with the FLSA could result in overtime liability for the unwary Pennsylvania employer.
Earlier this week, a federal court in Pennsylvania highlighted another area where the requirements of the FLSA and PMWA arguably differ. In Foster v. Kraft Foods Global, Inc. (pdf), the employer compensated non-exempt employees pursuant to the "fluctuating workweek" method of overtime compensation. Under the fluctuating workweek 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 (or "fluctuate") from week to week, because it is based upon the employee's actual hours worked. The fluctuating workweek method of overtime compensation is expressly permitted by the FLSA's regulations and used by many employers to compensate non-exempt employees on a fixed salary basis while minimizing overtime costs.
The court in Foster held that, contrary to the FLSA's regulations, the PMWA's regulations do not allow payment of only an additional one-half of the regular rate for overtime hours pursuant to the fluctuating workweek method. Instead, the court found that the PMWA requires that employees compensated under this method receive an addition one and one-half of their regular rate for overtime hours, essentially eliminating this method of compensation's primary advantage to employers.
Pennsylvania employers who compensate non-exempt employees pursuant to the fluctuating workweek method should reevaluate their practices in light of the Foster decision. The decision serves as a stark reminder for all Pennsylvania employers, even those who do not use the fluctuating workweek method, that FLSA compliance may be only half the wage and hour battle. All Pennsylvania employers should be aware that the requirements of the FLSA and the PMWA are not identical and ensure compliance with both laws.