Under the fluctuating work week method, non-exempt employees (entitled to overtime pay if they work more than 40 hours a week) who are paid a fixed salary regardless of hours worked are paid for all hours worked in a work week beyond 40 hours at half of their “regular rate” of pay. That “regular rate” is determined by dividing the employee’s salary by the number of hours worked that week. As a result, the regular rate of pay “fluctuates” depending on how many hours he or she works in a given week. Therefore, under this method, an employee may be paid a half time rate for the overtime hours they work.
Is this Allowed?
In short, no. Not in Pennsylvania.
While the Fair Labor Standards Act (“FLSA“), a federal statute, allows employers to use this method, the PA Supreme Court opinion holds that the Pennsylvania Minimum Wage Act (“PMWA“) does not. The Court ruled that the fluctuating work week method, which allows employees to be paid at lower overtime rates the more hours they work, violates the PMWA’s requirement that employers pay overtime compensation of at least one and a half times an employee’s regular rate for all hours worked in excess of 40 hours in a work week.
While the FLSA establishes a “national floor” under which wage protections cannot drop, individual states may enact greater protections under their own laws. The PA Supreme Court Opinion notes that the PMWA, despite being mostly modeled by the FLSA, is silent about whether the fluctuating work week method is permissible. The PA Supreme Court chose to view this silence as an intent to reject the .5 multiplier utilized under the fluctuating work week method in favor of a 1.5 multiplier. Thus, the Court rejected GNC’s use of the .5 multiplier for purposes of overtime pay calculation, affirming an earlier decision by the Pennsylvania Superior Court.
Posted by Taylor Gillan, a former associate with Feinstein Doyle Payne & Kravec, LLC.
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