In Chevalier v. General Nutrition Centers, Inc., the Pennsylvania Supreme Court recently decided that the fluctuating workweek pay method is unlawful under the Pennsylvania Minimum Wage Act (PMWA). The fluctuating workweek method is used to calculate overtime pay owed to non-exempt, salaried workers with inconsistent schedules, and is allowed for under the federal Fair Labor Standards Act. Under this method, non-exempt employees receive a fixed weekly salary, and overtime pay is calculated by dividing the employee’s salary by the actual numbers of hours worked in a given week to calculate the employee’s “regular rate,” then multiplying the regular rate by one-half (0.5) for any hours worked in excess of 40.

The Supreme Court ultimately held that the fluctuating workweek pay method violates the PMWA because the overtime premiums paid to employees do not actually pay workers one-and-a-half times their regular rate of pay when they work more than 40 hours, as required by the PMWA. Instead, the regular rate should be multiplied by one-and-a-half (1.5) for all hours worked in excess of 40 hours per week. Thus, Pennsylvania joined several other states, including Alaska, California, and New Mexico, to outlaw the fluctuating workweek pay method as a means of calculating overtime compensation. Pennsylvania employers using this method for non-exempt, salaried workers should immediately ensure all employees are compensated in accordance with this ruling.

If you have any questions regarding the issues raised in this client alert, or how to ensure compliance with your state’s labor laws, please contact your Labor and Employment Counsel at Smith, Gambrell & Russell, LLP.