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News | Nov 11, 2018

Overtime Lawyer Update: Quite a Few States Have Rejected the Fluctuating Workweek Method of Overtime Compensation

As we have previously reported, the Pennsylvania Superior Court issued an important decision in December 2017 in a case called Chevalier v. General Nutrition Centers, Inc.  This case addresses the amount of overtime pay that is due to salaried employees who work over 40 hours per week.  As detailed in a previous article on this website, the Superior Court’s opinion holds that, under the Pennsylvania Minimum Wage Act, salaried employees in Pennsylvania are entitled to full overtime pay equaling 150% of their regular pay rate.  This far more generous than the “half-time” overtime pay available under the federal FLSA’s “fluctuating workweek” (a.k.a. “Missel”) methodology.  Once again, if you want to delve into this issue, please see our previous article.

The Chevalier opinion is on appeal at the Pennsylvania Supreme Court, and our firm recently filed an amicus curiae brief urging the Supreme Court to affirm the Superior Court’s Opinion.  The brief was filed on behalf of the Pennsylvania AFL-CIO, The National Employment Law Project (NELP), Community Legal Services Inc., The Women’s Law Project, the Keystone Research Center, and Pathways PA.

Anyway, in doing research for the amicus brief, we were pleased to see that, beyond Pennsylvania, judges from several other states have rejected the half-time/fluctuating workweek method under their states overtime laws.  In case you are interested in this issue, here is the relevant passage from our amicus brief:

Consistent with this Court’s observation that the FLSA “establishes only a national floor under which wage protections cannot drop, but more generous protections provided by a state are not precluded,” Bayada, 8 A.3d at 883, various state courts have refused to impose the Federal FWW Method on workers covered by their state’s overtime laws.  These court decisions contradict GNC’s assertion that affirming the Superior Court majority will make Pennsylvania “the first and only state where the Federal FWW method was deemed unlawful in the absence of an express statutory prohibition.”  GNC Brief at 30).  While it is true that Alaska prohibited the use of the Federal FWW by the regulation upheld in Dresser Industries, Inc. v. Alaska Dept. of Labor, 633 P.2d 998 (Alaska 1981), other state statutes have been interpreted to prohibit the Federal FWW Method without having either express statutory or regulatory prohibitions.

In particular, some states have concluded, similar to Judge Moulton, that the Federal FWW Method is not permitted under state law because it is incompatible with other wage and hours provisions, either statutory, regulatory, or both.      For example, in Skyline Homes, Inc. v. Dept. of Industrial Relations, 211 Cal. Rptr. 792 (Cal. Ct. App. 1985), the California Court of Appeals refused to allow California employers to use the Federal FWW Method in determining the overtime pay owed to salaried manufacturing workers based upon other statutory and regulatory provisions it interpreted as incompatible with the Federal FWW Method.[1]  See id. at 794-802.  A similar approach was taken by the Montana Supreme Court in Glick v. State of Montana, 509 P.2d 1 (Mont. 1973).  Likewise, in Williams v. General Nutrition Centers, Inc., 166 A.3d 625 (Conn. 2017), the Connecticut Supreme Court, relying on administrative orders that it interpreted to be incompatible with the Federal FWW Method, held that GNC’s use of the Federal FWW Method to pay its salaried employees violated Connecticut wage law.  See id. at 627-34[2].

Meanwhile, like Judge Wettick in his underlying opinion, rulings in New Mexico and New Jersey interpret state laws to prohibit the Federal FWW Method based on the public policy behind the laws.  Particularly, in New Jersey Dept. of Labor v. Pepsi Cola Co., 2000 WL 34401845 (N.J. Admin. Aug. 29, 2000), the New Jersey Commissioner of Labor issued a final determination holding that using the Federal FWW Method to determine overtime wages under the New Jersey Wage and Hour Law was not “legally or equitably appropriate.”  Id. at 5.  As the Commissioner explained, the absence of any state law provision explicitly adopting the Federal FWW Method is, standing alone, dispositive of the issue.  See id.  On appeal, the Appellate Division of New Jersey’s Superior Court affirmed the Commissioner’s holding.  See New Jersey Dept. of Labor v. Pepsi Cola Co., 2002 N.J. Super. Unpub. LEXIS 2, *260-73 (N.J. Super Ct. App. Div. Jan. 31, 2002), cert. denied, 798 A.2d 1271 (N.J. 2002).

More recently, in Frisari v. Dish Network, LLC, AAA Case No. 18-160-001431-12 (Oct. 30, 2015), retired New Jersey Appellate Division Judge William A. Dreir issued a detailed arbitration award agreeing that the Federal FWW Method “has no basis in New Jersey law.”  See Appendix C at 2.  Judge Dreir’s thoughtful analysis – which is similar to Judge Wettick’s analysis in the instant lawsuit – bears repeating:

The New Jersey Supreme Court has noted the remedial purpose of the NJWHL and has dictated that this law “should be given a liberal construction.”  New Jersey Dep’t of Labor v. Pepsi-Cola Co., 170 N.J. 59, 62 (2001).  By engrafting this Fluctuating Work Week exception, the Arbitrator would not be giving this liberal construction to the law. If the Legislature or the Department of Labor through its regulatory powers had determined that the Fluctuating Work Week standard should apply, it could have amended the statute or promulgated a regulation in the many years that this rule has been applicable to the FLSA.  As the New Jersey authorities have not done so, the Arbitrator will not make this extension here.  The Arbitrator finds the Pennsylvania approach in Verderame, measured against the liberal construction required by the New Jersey courts, to be the correct application to apply in this case.

Id. at 6-7 (footnote omitted); see also New Mexico Dept. of Labor v. Echostar Communications Corp., 134 P.3d 780 (N.M. Ct. App. 2006) (rejecting Federal FWW Method basedon public policy behind New Mexico Minimum Wage Act).

In sum, there is nothing sacred about the Federal FWW Method.  At least six other states have rejected the method, upholding state sovereignty and protecting the state’s workers on top of the FLSA’s “minimum floor.”

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