Pennsylvania Labor and Employment Blog : Pennsylvania Labor and Employment Lawyer & Attorney : McNees Wallace & Nurick Law Firm : Human Resources, Workplace and Business Law : Harrisburg, Lancaster, Allentown, Lehigh

Recently, the District Court for the Western District of Pennsylvania delivered some potentially bad news to Pennsylvania employers. In Truman v. DeWolff, Boberg & Associates, Inc., the Court held that an employee may be entitled to overtime payments for time worked in foreign countries under the Pennsylvania Minimum Wage Act and the Pennsylvania Wage Payment and Collection Law. The plaintiff, Michael Truman, worked for D.B.A., Inc. for a little over a year, and during that time worked in both England and in Canada. Truman sought overtime pay for overtime hours he worked in excess of 40 hours per week in both England and Canada.

At the summary judgment stage, the Truman admitted that he was not entitled to overtime payments under the Fair Labor Standards Act (FLSA) which specifically exempts work in foreign countries from overtime pay entitlements. However, Truman argued that under the Pennsylvania Minimum Wage Act he was entitled to such overtime payments because the Pennsylvania Minimum Wage Act provided for benefits exceeding those under the FLSA. The Court stated that unlike the FLSA, there was no specific exemption for working in foreign countries under the Pennsylvania Minimum Wage Act. The Court also noted that the Eastern District of Pennsylvania previously held that work in other states by Pennsylvania-based employees was covered by Pennsylvania Law. The Court concluded that there is nothing within the Pennsylvania Minimum Wage Act that restricts the benefits of the Act to work performed within the United States.

The Court also noted that the FLSA allows for state laws to provide greater protection than allowed under the FLSA, and therefore, there was no preemption issue in this case. The Court noted that there was no implied foreign work exemption under the Pennsylvania Minimum Wage Act, and therefore, for Pennsylvania residents working for Pennsylvania-based employers, there is no exemption from overtime pay requirements for work in foreign countries. The Court said that the analysis under the FLSA and the Pennsylvania laws is only identical if the language of the FLSA and state laws is identical. In this case, the analysis was different because the language was not identical, and therefore, the Court allowed the Plaintiff to move forward on his claim that he was entitled to overtime pay for hours worked in a foreign country under Pennsylvania law.

This decision has the potential to be costly for some Pennsylvania employers. How the courts will define who is a Pennsylvania resident and who is a Pennsylvania based employee for purposes of the Pennsylvania Minimum Wage Law and the Pennsylvania Wage Collection Act is unclear. These, and other issues, will need to be defined by the Courts in the future. In the meantime, employers are well advised to review their compensation practices in light of this decision.

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The Prohibition on Excessive Overtime in Health Care Act (Act 102) became effective on July 1, 2009. Health care facilities covered by the law include hospitals, ASCs, hospices, long-term care facilities and other inpatient facilities, but it excludes private physician offices and group practices. Employees protected by the law include all nonsupervisory employees involved in direct patient care activities or clinical services, including individuals employed through a temporary service or employment agency. Physicians, physician’s assistants, dentists, and job classes with no direct patient care are excluded from the overtime limitations.

A health care facility cannot compel a protected employee to work more than an agreed to, predetermined and regular daily shift exclusive of “on call” time, unless one of the following exceptions applies:

1. the employee voluntarily agrees;
2. there is an unforeseen emergent circumstance but as a “last resort”, after exhausting other staffing options and giving the employee one hour arrange for family care alternatives;
3. the extended work is required to complete a patient care procedure already in progress, but only if the employee’s departure would have an adverse effect on the patient.

Employers are permitted to have agreed upon, predetermined and regular shifts greater than 8 hours; however, an employee who volunteers to work more than 12 consecutive hours shall be entitled to 10 hours off duty but may waive the entitlement. Employers may not retaliate against employees who refuse to accept work in excess of the limits. Employers who violate the law are subject to fines ranging from $100 to $1000 per violation.

The Department of Labor and Industry has posted a FAQ on its website summarizing common compliance questions. There is also a summary of the law.

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Clinical staffing problems for Pennsylvania healthcare facilities created by shortages of nursing professionals will be greatly exacerbated by a new law prohibiting mandatory overtime for employees engaged in direct patient care. The Commonwealth is already facing a nursing shortage, which is growing worse. According to the Health Resources and Services Administration (HRSA), an arm of the U.S. Department of Health and Human Services, Pennsylvania health care providers will experience a 41 percent vacancy rate in nursing positions by the year 2020, requiring more than 54,000 nurses to provide adequate patient care. Restrictions on the amount of work time for an already short labor pool will likely increase problems.

The Prohibition on Excessive Overtime in Health Care Act becomes effective on July 1, 2009. Health care facilities covered by the law include hospitals, ASCs, hospices, long-term care facilities and other inpatient facilities, but it excludes private physician offices and group practices. Employees protected by the law include all nonsupervisory employees involved in direct patient care activities or clinical services, including individuals employed through a temporary service or employment agency. Physicians, physician’s assistants, dentists, and job classes with no direct patient care are excluded from the overtime limitations.

A health care facility cannot compel a protected employee to work more than an agreed to, predetermined and regular daily shift exclusive of “on call” time, unless one of the following exceptions applies:

(1)     the employee voluntarily agrees;

(2)     there is an unforeseen emergent circumstance but as a “last resort”, after exhausting other staffing options and giving the employee one hour arrange for family care alternatives;

(3)     the extended work is required to complete a patient care procedure already in progress, but only if the employee’s departure would have an adverse effect on the patient.

Employers are permitted to have agreed upon, predetermined and regular shifts greater than 8 hours; however, an employee who volunteers to work more than 12 consecutive hours shall be entitled to 10 hours off duty but may waive the entitlement. Employers may not retaliate against employees who refuse to accept work in excess of the limits. Employers who violate the law are subject to fines ranging from $100 to $1000 per violation.

The Department of Labor and Industry is to develop regulations within 18 months.  The law received modest press as it was signed by the Governor along with 31 other pieces of legislation.

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It’s no secret that the FLSA is anachronistic, but now it’s ruining the planet too. The 40-hour week divided into 5 consecutive workdays is a product of the FLSA, which was enacted in 1938. During the last 70 years, we have been consuming energy by commuting to work and operating facilities all the while pumping green house gasses into the atmosphere for an extra day a week.

Aaron Newton makes this brilliant observation in his post on The 4 Day Work Week:

The notion of our standard work week here in America has remained largely the same since 1938. That was the year the Fair Labor Standards Act was passed, standardizing the eight hour work day and the 40 hour work week. Each Monday, Tuesday, Wednesday, Thursday and Friday workers all over the country wake up, get dressed, eat breakfast and go to work. But the notion that the majority of the workforce should keep these hours is based on nothing more than an idea put forth but the Federal government almost 70 years ago. To be sure it was an improvement in the lives of many Americans who were at the time forced to work 10+ hours a day, sometimes 6 days of the week. So a 40 hour work week was seen as an upgrade in the lives of many of U.S. citizens. 8 is a nice round number; one third of each 24 hour day. In theory it leaves 8 hours for sleep and 8 hours for other activities like eating, bathing, raising children and enjoying life. But the notion that we should work for 5 of these days in a row before taking 2 for ourselves is, as best I can tell, rather arbitrary.

Mr. Newton then goes on to offer Sixteen Reason Why this is an Idea Whose Time has Come. This post is a “must read” for HR Professionals whose businesses may be evaluating the 4-day workweek option and looking for supporting reasons. The key downsides to the four-day week are losses in employee productivity and customer service. Comments challenging the 4-day workweek appear at the Oil Drum, which reprinted Newton’s post.

We have also outlined some legal limitations on the four-day concept in previous posts as it continues to garner a lot of media attention:

Four-Day Work Week Wave is Coming and Energy Expenses And Gas Prices Motivate Employers To Move To Four Day Workweek: What Are The Legal Issues?

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Employers sometimes pay bonuses to nonexempt employees without a thought of potential wage and hour compliance. Ann Bares at Compensation Force notes that Companies may pay a “lump sum” merit increase for employees who are topped out of a salary range. Other examples of lump sum payments include attendance and production bonuses, year-end bonuses and holiday gifts.  Bonuses and other lump sum payments may be included in a nonexempt employee’s regular rate depending upon the manner in which the bonus is calculated and the company’s prior communication. Inclusion in the regular rate impacts overtime calculations and payments.

Bonuses paid to nonexempt employees are included in the determination of the employees’ regular rate under section 778.208 unless the bonus falls into one of several exceptions. The bonuses are allocated to the pay period and added to other wages paid to nonexempt employees and then divided by the hours worked for the same period to determine the new regular rate under the methodology described in section 778.209. For bonuses earned over more than one workweek, the bonus must be allocated to pay periods to which the bonus applies and the regular rate recalculated. If overtime was worked during this period, the overtime rate must be revised to be time and a half the recalculated regular rate that includes the bonus payment. This is a nightmare.

Department of Labor regulations provide for several exclusions. Among these excludable bonus payments are discretionary bonuses, gifts and payments in the nature of gifts on special occasions, contributions by the employer to certain welfare plans and payments made by the employer pursuant to certain profit-sharing, thrift and savings plans. These exemptions are discussed in Section 778.211 Discretionary Bonuses, Section 778.212 Gifts and Holiday Bonuses, Section 778.213 Qualified Profit Sharing and Savings Plans, and Section  778.214 Other Qualified Plans.  Bonuses, which do not qualify for exclusion from the regular rate as one of these types, must be totaled in with other earnings to determine the regular rate on which overtime pay must be based.

Typically, any bonus announced in advance and tied to work performance, hours or other productivity will not qualify for an exemption.  There three ways to manage the recalculation problem, other than utilizing qualified plans:

1.            Percentage Total Earnings Bonus: Bonuses based on a percentage of the nonexempt employee’s total earnings under section 778.210 do not result in a recalculation of the regular rate because overtime is already been accounted for in the calculation. Under this method, the bonus is described as a percentage of the nonexempt employee’s total (W-2) earnings, thereby including both regular and overtime payments and obviating the need for recalculation of the regular rate.

2.            Discretionary Bonuses: This is an area of DOL audit scrutiny and should not be used on a regular or aggressive basis. Truly discretionary bonuses are not included in the regular rate of pay under section 778.211, if both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly. The following sets forth some of the parameters of the exclusion:

For example, any bonus which is promised to employees upon hiring or which is the result of collective bargaining would not be excluded from the regular rate under this provision of the Act. Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay. Attendance bonuses, individual or group production bonuses, bonuses for quality and accuracy of work, bonuses contingent upon the employee's continuing in employment until the time the payment is to be made and the like are in this category. They must be included in the regular rate of pay.

3.            Holiday Bonuses: The Holiday Gift and Bonus exemption under section 778.212 allows for the exclusion from calculation of an employees “regular rate” of pay “sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent upon hours worked, production, or efficiency….” The following sets forth some of the parameters of the exclusion:

If the bonus paid at Christmas or on other special occasion is a gift or in the nature of a gift, it may be excluded from the regular rate under section 7(e)(1) even though it is paid with regularity so that the employees are led to expect it and even though the amounts paid to different employees or groups of employees vary with the amount of the salary or regular hourly rate of such employees or according to their length of service with the firm so long as the amounts are not measured  by or directly dependent upon hours worked, production, or efficiency. A Christmas bonus paid (not pursuant to contract) in the amount of two weeks' salary to all employees and an equal additional amount for each 5 years of service with the firm, for example, would be excludable from the regular rate under this category.

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