Here is some good news for Pennsylvania workers and their advocates: On December 22, 2017, Pennsylvania Superior Court Judge Geoffrey Moulton issued a scholarly 44-page opinion explaining that, under the Pennsylvania Minimum Wage Act (“PMWA”), Pennsylvania employers may not use the dreaded “half-time” method in determining the amount of extra overtime pay owed to salaried workers. The case is Chevalier v. General Nutrition Centers, Inc., and a copy of Judge Moulton’s majority opinion in is available HERE. Although several federal district court judges have issued similar opinions, see, e.g., Verderame v. RadioShack Corp., 31 F. Supp. 3d 702 (E.D. Pa. 2014), this is the first time a Pennsylvania appellate court has confronted the issue. Here is what you need to know:
Under the federal overtime law (known as the Fair Labor Standards Act or the “FLSA” for short), employers required to make overtime payments to salaried employees usually can get away with calculating the extra pay based on a “half-time” methodology. I won’t bore you with too many details, but this method has its genesis in the U.S. Supreme Court’s 1942 decision in Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942), and was later codified by the Department of Labor at 29 C.F.R. 778.114. The FLSA’s half-time method is sometimes referred to as the “Missel” method or the “fluctuating workweek” method.
Regardless of the nomenclature, the FLSA’s half-time method is bad for salaried workers. Here’s how the half-time method works: Ann is an Assistant Manager at a convenience store and is paid a salary of $500 per week. On a particular week, she works a total of 50 hours. So now the boss needs to determine how much extra overtime pay is owed to Ann. Under the half-time method, the boss must divide Ann’s $500 salary by her 50 hours of work to convert her salary to a regular pay rate of $10/hour. Then, the boss is allowed to assume that Ann already received $10 for each of her 10 overtime hours. Thus, the boss is merely required to provide Ann with extra half-time pay for her 10 overtime hours. In other words, Ann receives an extra $50 ($5 X 10 hours) for her 10 hours of overtime work.
The Superior Court’s new Chevalier opinion addresses whether the above half-time approach is allowed under the PMWA. This gets a little complicated, but, when Judge Moulton’s lead opinion is combined with the concurring opinion and the dissenting opinion, we are left with two important holdings:
First, a majority of the panel endorsed the FLSA’s practice of converting the salary to a regular hourly rate by dividing the salary by all hours worked. In taking this approach, the Superior Court rejected the worker’s argument that the regular rate should be determined by dividing the salary by 40 hours.
Second, a majority of the panel rejected the company’s argument that a worker’s extra overtime pay should be limited to a mere half-time rate for the overtime hours. Instead, the worker must receive extra overtime pay calculated at 150% (or “time and one-half”) of the regular rate. This second holding represents an excellent result for Pennsylvania workers.
Let’s go back to Ann, our convenience store Assistant Manager who, under the half-time method, was entitled to an extra $50 for her 10 overtime hours. Under the PMWA’s Chevalier method, Ann’s $500 salary would still translate to a $10/hour regular pay rate. But, she is now entitled to $15 (150% of $10) for every overtime hour, bringing her total extra overtime pay to $150 ($15 X 10 hours) rather than the skimpy $50 she was entitled to under the FLSA’s half-time method.
So Pennsylvania workers have good reason to thank Superior Court Judge Geoffrey Moulton this Holiday Season for his extensive and scholarly opinion in Chevalier.