I always tell clients it is not enough to “merely” comply with the Fair Labor Standards Act on wage-hour issues. I always tell them that they must comply with State law, which may (often) be stricter than the federal law and if they do not, and are sued in a State court, compliance with federal law will not help them as a defense. A recent example in Pennsylvania proves this point dramatically.
In this regard, the Pennsylvania Department of Labor and Industry (“DOL”) amended the wage-hour regulations to modify the manner of overtime calculation for non-exempt salaried employees. I often advise clients to place such employees on the Fluctuating Work Week (“FWW”) method of overtime payment because that reduces the employer’s overtime exposure. Now, Pennsylvania has done away with that option.
The regulatory change has altered the manner in which the “regular rate,” which overtime is based upon, is calculated. The modification mandates that the weekly compensation (salary, bonuses, commissions, etc) be divided by forty (40) instead of utilizing the FWW method of computing regular rate, which divides total compensation by the total hours worked in that week, rather than the generic forty. That FWW calculation will always produce a lower regular rate than dividing by the magical forty. The forty-hour regular rate then is multiplied by the traditional time-and-one-half which produces a much higher amount of overtime due for that week.
This regulation is an apt illustration of the duality of the legal frameworks that employers must comply with. In many, if not all, the other States, the FWW method of overtime payment for salaried non-exempt people would be appropriate but not, as of recently, in Pennsylvania. Sometimes there are nuances in state laws or in the manner in which a particular state Department of Labor interprets a provision. Some of these interpretations may well not be published or accessible on-line or elsewhere. That is why I always will inquire of the particular DOL (seeking to reach someone above the investigator level) if a quirky issue of state law presents itself or if I believe there may be a divergence between that State law and the FLSA.
That ounce of prevention thing…