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Is Your Paycheck Light? Watch Out for This Overtime Loophole That’s Illegal in PA

January 23, 2015 Wage Theft & Unpaid Wages

“Fluctuating workweek” is allowable under federal law, but not Pennsylvania state law

Say you’re a non-exempt employee – that is, someone who is eligible for overtime. One week you work 50 hours.

You know that overtime is supposed to be paid at time-and-a-half for any hours worked over 40 hours. That means it should be an easy calculation to figure out what your next paycheck should be, right?

But when the check arrives, it’s for considerably less money than you expected. You tell your manager that the check is wrong.  But he insists that the figure is correct, because it was calculated using a “fluctuating workweek” model.

Since you’ve never heard of that before, you can’t help but wonder if it’s legal. (Hint: It is and it isn’t.)

A Different Way of Calculating OT

David Verderame, a manager at a Radio Shack store in Pennsylvania, had never heard of the “fluctuating workweek” either – until he received a paycheck that was considerably smaller than he thought it should’ve been.

As a manager, Verderame received a regular weekly salary and was also eligible for overtime. According to Radio Shack’s company policy, overtime pay for non-exempt managers was calculated on a fluctuating workweek model, in accordance with the Fair Labor Standards Act (FLSA).

The fluctuating workweek can generally be used to determine overtime pay for employees who are salaried, but who may work a different number of hours each week. Overtime is calculated using a formula that often results in the employee receiving a lower hourly rate for hours worked during a given week.

What that meant in Verderame’s case was that his regular hourly pay rate became more diluted with each overtime hour that he worked, so his check appeared to be short.

Numbers Didn’t Add up

Verderame couldn’t quite fathom why his hourly rate should go down when he was actually clocking more work time than before. He spoke to a lawyer, and he and a group of other Radio Shack employees sued the company for violating the Pennsylvania Minimum Wage Act (PMWA).

The company argued that using the fluctuating workweek model was allowable under the FLSA. Verderame’s lawyer countered that while the FLSA allowed fluctuating workweeks, Pennsylvania state law did not.

The company lost. The court wrote in its opinion that PMWA requires that employees’ overtime wages be calculated based on their regular hourly base rate of pay, not the weekly hourly rate.

(The case discussed here is Verderame v. Radio Shack.)

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