On December 22, 2017, a three-judge panel of the Superior Court of Pennsylvania ruled two to one that the Pennsylvania Minimum Wage Act (PMWA), 43 P.S. Secs. 333.101-333.115, requires payment of a higher rate for each overtime hour worked than does the federal Fair Labor Standards Act’s (FLSA) fluctuating workweek (FWW) method. The court held that the PMWA requires one and one half times the regular rate for each overtime hour, instead of the half-time rate allowed under the FWW. Instead of filing a request with the Superior Court of Pennsylvania for reargument en banc, on January 22, 2018, the company filed a petition with the Pennsylvania Supreme Court for allowance of an appeal. Chevalier v. General Nutrition Centers, Inc.
Background
The employer in the case is General Nutrition Corporation and its affiliate, General Nutrition Centers, Inc. (GNC). The plaintiffs are a class of salaried, nonexempt, current or former Pennsylvania store managers, assistant managers, or senior managers who were paid overtime compensation based upon the FWW method approved under the FLSA.
The case started out in the Court of Common Pleas of Allegheny County, Pennsylvania, and was assigned to Judge R. Stanton Wettick, Jr., now retired. There were two main issues: (1) how to calculate a salaried employee’s “regular rate,” and (2) whether GNC has to pay an additional one and one half times the regular rate for each overtime hour or only half of the regular rate.
To illustrate, let’s assume that a worker’s weekly salary is $1,000, and that during the week in question the employee works 50 hours. The plaintiffs in this case contended that, in calculating the regular hourly rate, the $1,000 weekly salary should be divided by 40 hours, not by the entire 50 hours actually worked. This would yield a regular rate of $25 per hour, as opposed to $20. The plaintiffs further contended that the worker should be paid time and a half at this rate (i.e., $37.50) for each of the 10 overtime hours, i.e., an additional $375 total. On the other hand, GNC argued that the $1,000 weekly salary should be divided by the total hours worked that week (i.e., 50), resulting in a regular hourly rate of only $20. Furthermore , on GNC’s assumption that it had already paid the employee $20 (via his or her salary as the regular hourly rate of pay) for each overtime hour, GNC maintained that all that it had to pay additionally was the “half” portion of the time-and-a-half rate—or $10 per hour—for a total of $100. GNC argued that both elements of its computation comply with the FLSA’s interpretation of the FWW.
The lower court sided with the plaintiffs on both issues, in part because it felt that in adopting the PMWA the legislature intended to discourage employers from scheduling employees to work overtime and to encourage employers to hire more workers. Making overtime work more expensive for employers furthers this objective. Judge Wettick further noted that the GNC’s FLSA method of computation actually would encourage overtime, since the regular hourly rate would be reduced with each overtime hour the employee worked.
Thus, Judge Wettick awarded the plaintiffs $1,378,494.77 plus interest, counsel fees in the amount of $360,000, and $8,000 in litigation costs. GNC appealed to the Superior Court of Pennsylvania.
The Superior Court’s Holding
The case was assigned to a panel consisting of Judges Moulton, Solano, and Musmanno (with Judge Musmanno voting for complete affirmance, Judge Solano voting for complete reversal, and Judge Moulton voting to reverse Judge Wettick on the method of calculating the regular hourly rate, but to affirm the ruling that requires the additional payment of the full time and a half for each overtime hour). Judge Moulton authored the majority opinion, in which he discusses extensively the FLSA, the cases decided thereunder, and their applicability and/or inapplicability to the PMWA. Judge Moulton also notes that after oral argument, the court took the unusual step of issuing an order requesting (but not requiring) the Pennsylvania Department of Labor and Industry (to which the legislature has delegated the responsibility for promulgating regulations interpreting the “regular rate” statutory language) to give its views on these issues, but that the department respectfully declined.
The panel affirmed the lower court’s decision in part and reversed it in part, vacated the award of counsel fees and litigation costs, and remanded the case for further proceedings.
GNC could have requested reargument en banc, but instead it chose to ask the Pennsylvania Supreme Court to hear the case. Whether it will take the case is discretionary; the court can refuse. The plaintiffs have until February 5, 2018, to file a cross petition if they want the court to take up the panel’s decision on how to calculate the regular hourly rate. The Pennsylvania Supreme Court’s internal operating procedures allow for at least five months before the court has to rule upon the petition(s). If the supreme court does decide to take the case, then it will issue a briefing and argument schedule, after which it will take the matter under advisement.
Key Takeaways
Until reversed by the supreme court, the superior court ruling remains in effect. Employers subject to the PMWA may want to ensure their policies and practices conform with the superior court decision.
