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Resolving a dispute over how overtime should be calculated for salaried employees in the state, the Pennsylvania Supreme Court has ruled that employers must pay salaried employees an additional 150%—as opposed to an additional 50%—of their regular rate for every hour worked over 40 in a given week.

In Chevalier v. General Nutrition Centers, the justices ruled 6-1 to affirm a decision by a split three-judge Superior Court panel. The panel had reversed the decision of an Allegheny County Court of Common Pleas judge and said that paying only an additional half of a salaried employee's regular rate for overtime, as prescribed by the federal Fair Labor Standards Act, violated Pennsylvania's Minimum Wage Act.

The dispute in Chevalier centered on differing interpretations of Section 231.41 of the Pennsylvania Department of Labor and Industry's regulations, which states that "each employee shall be paid for overtime not less than one and a half times the employee's regular rate of pay for all hours in excess of 40 hours in a workweek."

The FLSA requires employers to use the "fluctuating work week" or FWW method to calculate overtime. Under that method, which defendant GNC uses, a salaried employee's "regular rate" is determined by dividing their weekly salary by the actual number of hours they worked that week, rather than using a standard 40-hour week. Under this method, the regular rate fluctuates from week to week. The employer then calculates the overtime rate for each week as an additional 0.5 times the regular rate for each hour worked over 40 because the employee's straight salary essentially covers the first 100% of the overtime compensation.

But plaintiffs Tawny Chevalier and Andrew Hiller, GNC employees who are pursuing a class action against the company over its overtime policies, argued that the PMWA requires employers to pay an additional 150% of a salaried employee's regular rate for each hour worked beyond 40, regardless of how the regular rate is calculated.

The Superior Court ruled that, while the PMWA adopted the FLSA's approach to calculating a salaried employee's regular rate, it did not likewise adopt the method for calculating overtime pay. The plaintiffs have since conceded on the regular rate calculation issue, meaning only the dispute over the overtime multiplier was before the Supreme Court.

Defendant GNC argued that, given the similarities between the FLSA and the PMWA, the state law should be construed as adopting the entire FWW method.

GNC also argued that it would be illogical, given the plaintiffs' agreement that the PMWA adopted the FLSA's method for determining the regular rate, to find that state law rejects the second step of the federal overtime pay equation.

But the plaintiffs argued that because the PMWA provides for Pennsylvania's secretary of labor to promulgate regulations, the secretary's silence on the FWW method amounts to a rejection of the FLSA's approach.

Justice Max Baer, writing for the majority, said both interpretations of the statutory language were reasonable—and lamented the lack of legislative or administrative guidance on the issue—but ultimately concluded that Section 231.41′s "'not less than one and a half times the employee's regular rate'" language, viewed with the stated legislative intent to increase employees' wages in mind, indicated a break with the FLSA's approach.

"This language, when mechanically applied, comports with plaintiffs' analysis as it requires 'all hours in excess of 40′ to be paid at 1.5 times the regular rate, regardless of whether the regular rate was calculated based upon the actual hours worked," Baer said. "Considering this application in light of the unmistakable intent of the General Assembly to use the commonwealth's police power to increase wages to combat the 'evils of unreasonable and unfair wages,' we conclude that the rules of statutory construction favor plaintiffs' interpretation requiring application of the 1.5 multiplier."

Baer added, "This interpretation is further supported by the secretary's overt application of the 0.5 multiplier for day and job rate compensation arrangements by adopting Section 778.112 of the federal regulations verbatim but not adopting Section 778.114, which applies the FWW method's 0.5 multiplier to salaried employees working fluctuating hours."

"Thus, we view the secretary's silence as an intent to reject the 0.5 multiplier of the FWW method in favor of the 1.5 multiplier," Baer said.

Baer was joined in full by Justices Debra Todd, Kevin Dougherty and David Wecht. Justices Sallie Updyke Mundy and Christine Donohue concurred in the result.

Donohue, in a concurring and dissenting opinion, agreed with the result but disagreed with the majority's attempt "to glean the department's intent from its failure to follow a legislative directive to enact regulations detailing the manner in which overtime compensation is to be calculated."

"In my view, this inference is unsound jurisprudentially," Donohue said. "There is nothing for this court to glean from the department's abdication of the responsibility conferred on it by the General Assembly, other than that it did so abdicate."

Chief Justice Thomas Saylor filed a one-sentence concurring and dissenting opinion, adopting the reasoning of Superior Court Judge Carl Solano's concurring and dissenting opinion, which argued, "In sum, the secretary has not promulgated regulations stating that overtime is to be calculated by adding an additional 150% of an employee's regular rate when paying overtime. The regulations parroting the statutory language simply do no more than to parrot the statutory language. They state nothing about how to do the calculation. The only regulation addressing the subject, Section 231.43(b), says to calculate overtime in the same way as is done under the FLSA. Nothing in the regulations states that Section 231.43(b) is an exception to calculation rules that would otherwise apply."

Justice Sallie Updyke Mundy penned a concurring opinion emphasizing that, because the regular rate calculation dispute was settled following the Superior Court's ruling, it was not actually before the Supreme Court in this case. Therefore, Mundy said, there may be future litigation in which the justices will be tasked with addressing that issue head-on.

Peter Winebrake, a labor and employment lawyer with Winebrake & Santillo in Dresher, who filed amicus briefs on behalf of several organizations including Community Legal Services and the National Employment Law Project, said in a statement that "Pennsylvania workers should be delighted by" the high court's opinion.

"The Supreme Court has reinforced the principle that, in many respects, the PMWA is more employee-friendly than the federal FLSA," he continued. "Generally speaking, state law is the new frontier of workers' rights. While the Trump administration rolls back federal workplace protections, workers will increasingly turn to state laws and state courts for protection."

Robert Pritchard of Littler Mendelson, who represented GNC, did not respond to a request for comment; nor did Michael Simon of Roe & Simon, who represented the plaintiffs.