What is the fluctuating workweek method of overtime compensation? Why is it no longer good in PA? And why should you care?
I answer all of these hard-hitting questions -- like a BOSS -- after the jump...
What is the fluctuating workweek overtime compensation method?
If an employee is classified as non-exempt, that employee must receive at least one and one-half times their regular rate of pay for overtime (hours worked over 40 in a workweek).
The fluctuating workweek method of calculating OT compensation allows an employer to pay an employee a fixed, weekly salary, regardless of the number of hours worked. OT is then paid out at one-half times the regular rate of pay (rather than one and one-half times the regular rate). The regular rate of pay is determined by dividing the fixed salary by the total number of hours worked in a workweek. This method of paying OT benefits the employer if employees generally work more than 40 hours per week (because the effective hourly rate is driven down).
Sort've confusing, huh? Well, don't worry PA employers, because it appears that you can't use it in PA anymore.
Why can't Pennsylvania employers use it anymore?
Just check out this decision from Monday, where a PA federal court held that fluctuating workweek method of calculating OT compensation, although legal under the Fair Labor Standards Act, violates the Pennsylvania Minimum Wage Act.
The court found the analysis of this prior decision convincing. Namely, a plain reading of the supporting regulations to the Pennsylvania Minimum Wage Act require that even if an employer reaches an agreement with its employees before work is performed as to a regular rate of pay, the employer must still pay OT at a "rate not less than 1 ½ times the rate established by the agreement."
So much for an agreement to pay a fixed salary and only 1/2 times the regular rate for OT.
But, hey! Don't shoot the messenger. Instead, why not take a few seconds and nominate The Employer Handbook for the ABA Journal's 2012 Blawg 100 Amici.