Chevalier ex rel. Situated v. Gen. Nutrition Ctrs., Inc.

220 A.3d 1038

Tawny L. CHEVALIER and Andrew Hiller, on Behalf of Themselves and All Others Similarly Situated, Appellees

v.GENERAL NUTRITION CENTERS, INC. and General Nutrition Corporation, Appellants

Tawny L. Chevalier and Andrew Hiller, on Behalf of Themselves and All Others Similarly Situated, Appellees

v.General Nutrition Centers, Inc., and General Nutrition Corporation, Appellants

No. 22 WAP 2018

No. 23 WAP 2018

Supreme Court of Pennsylvania.

Argued: April 10, 2019

Decided: November 20, 2019

OPINION

JUSTICE BAER

In this case, we consider the calculation of overtime compensation for non-exempt salaried workers under the Pennsylvania Minimum Wage Act of 1968 (PMWA), 43 P.S. §§ 333.101 - 115, and the related regulations adopted by the Pennsylvania Department of Labor and Industry (Pennsylvania Regulations), 34 Pa. Code §§ 231.41 - 43. Specifically, we address whether these statutory and regulatory provisions allow for the usage of the Fluctuating Work Week method (FWW Method) for calculating overtime compensation for salaried employees working fluctuating hours. As explained in detail below, we affirm the Superior Court's decision rejecting the use of the FWW Method under the PMWA and the Pennsylvania Regulations, which we find distinguishable from the federal Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 - 219, and related regulations, 29 C.F.R. §§ 778.0 - 778.603 (Federal Regulations), which overtly adopt the FWW Method for salaried employees working fluctuating hours, 29 C.F.R. § 778.114 (entitled "Fixed salary for fluctuating hours").

In September 2013, Tawny L. Chevalier filed a class action complaint against General Nutrition Centers, Inc., a Delaware corporation, and General Nutrition Corporation, a Pennsylvania corporation (collectively GNC).¹ Chevalier had previously been employed by GNC as a store manager and senior store manager, earning a set weekly salary plus commissions, regardless of the number of hours she worked in a given week. GNC additionally paid her overtime for any hours worked in excess of forty hours in a week by utilizing the FWW Method explained below. Essentially, Chevalier argued that the FWW Method did not satisfy the PMWA's requirement that employees "shall be paid for overtime not less than one and one-half times the employe[e]'s regular rate." 43 P.S. § 333.104(c).²

She later amended her complaint to add Andrew Hiller, also a former GNC store manager, as a named plaintiff and class representative (collectively, Plaintiffs). Plaintiffs asserted that they were bringing the class action "on behalf of all former or current managers, assistant managers and senior store managers and other ‘non-exempt’ GNC employees that are paid overtime based upon the ‘Fluctuating Work Week Method’ ... of overtime compensation." Compl. at ¶ 5.³ The Plaintiffs worked at GNC between 2009 and 2011.

I. Background

Before addressing the parties' arguments, we first briefly describe the mechanics of the FWW Method in the context of the relevant Federal and Pennsylvania statutes and regulations. A starting point for understanding the FWW Method is the requirement in both the federal and state statutes that employers pay employees overtime compensation of "not less than one and one-half times [the employee's] regular rate" for all hours worked in excess of forty during a week. See 29 U.S.C. § 207(a)(1) ; 43 P.S. § 333.104(c).⁴ This requirement is fairly straightforward for employees who earn a set hourly wage as it merely requires multiplying the number of hours over forty by one and one-half times the hourly rate. The determination of what constitutes "one and one half times the regular rate," however, is more complicated for employees who are paid pursuant to non-hourly compensation arrangements, including payment for work completed, commissions, or salaries. For some of these compensation arrangements, the Pennsylvania and Federal Regulations provide guidance concerning the permissible methods of calculating the "regular rate," with the Federal Regulations addressing a significantly greater variety of compensation arrangements than what is provided in the Pennsylvania provisions.⁵

As is relevant to the case at bar, the Pennsylvania provisions do not specifically address a method for calculating overtime for employees, such as Plaintiffs, who are paid a set weekly salary regardless of the hours worked each week. For these employees, the hourly rate of pay necessarily "fluctuates" each week based upon the number of hours worked, given that the agreed upon salary stays constant while the number of hours worked varies from week to week.

Unlike the Pennsylvania provisions, the Federal Regulations specifically address the overtime compensation of salaried employees working fluctuating hours, providing at least two potential methods of calculation, as will be discussed in detail infra . Relevant to this case, federal Section 778.114, entitled "Fixed Salary for Fluctuating Hours," explicitly permits employers to use the FWW Method, 29 C.F.R. § 778.104. Indeed, the permissibility of the FWW Method under federal jurisprudence predates the adoption of the regulation. In 1940, the FWW Method was set forth in the Department of Labor's Interpretive Bulletin Number 4 and was approved two years later by the United States Supreme Court in Overnight Motor Transportation Company, Inc. v. Missel , 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942).

Under the FWW Method, the salaried employee's "regular rate" of pay is determined by dividing the total of the weekly salary by the number of hours actually worked that week. This construct presumes that the weekly salary compensates the employee for the "straight time" worked during the week, including any hours worked in excess of forty. Thus, in regard to the statutory requirement that an employee be paid overtime of "one and one-half times the regular rate," an employer utilizing the FWW Method arguably has paid the employee the initial "one ... times the regular rate" through the payment of the weekly wages for the hours worked. The employer then accounts for the overtime requirement of an additional "one-half times the regular rate" by multiplying the number of hours in excess of forty by 0.5 times the regular rate, which we will refer to as the "0.5 Multiplier."⁶ As explained in detail below, Plaintiffs assert that overtime compensation should be calculated by multiplying the number of hours worked in excess of forty by 1.5 times the regular rate, which we will refer to as the "1.5 Multiplier."

II. Trial Court Proceedings

In support of their class action complaint, Plaintiffs contrasted the explicit federal adoption of the FWW Method for salaried employees working fluctuating hours with the absence of a similar provision under the PMWA or the Pennsylvania Regulations. As noted, instead of the FWW Method, Plaintiffs asserted that overtime under the PMWA for salaried employees with fluctuating hours should be calculated by using the 1.5 Multiplier.⁷ Plaintiffs sought restitution of all overtime wages due to the class, as well as costs of litigation and reasonable attorney fees. Am. Compl. at ¶ 27.

After GNC filed its answer and new matter, the trial court ordered the parties to file cross motions for summary judgment, presumably recognizing that the dispute raised a pure question of law regarding the permissibility of the FWW Method for salaried employees working fluctuating hours under the PMWA and the relevant Pennsylvania Regulations, 34 Pa. Code §§ 231.41 - 43. In response, Plaintiffs filed a Motion for Partial Summary Judgment or in the Alternative, for Judgment on the Pleadings, and GNC filed a Motion for Summary Judgment.⁸

In their several filings, Plaintiffs reiterated their argument which they continue to pursue before this Court, claiming that the FWW Method's use of the 0.5 Multiplier violated the PMWA-mandated payment of "one and one-half times the regular rate." They also rejected GNC's suggestion that the PMWA should be interpreted consistently with federal Section 778.114, adopting the FWW Method. Rather than incorporating the federal provisions in toto , Plaintiffs maintain that the PMWA and the Pennsylvania Regulations selectively adopted aspects of the federal provisions with the intent to provide greater protection for Pennsylvania's workers and did not embrace Section 778.114. Thus, Plaintiffs argued that GNC violated the PMWA by failing to utilize the 1.5 Multiplier.

In response, GNC asserted that the FWW Method is permissible under the PMWA. GNC maintained that Plaintiffs' calculation of overtime pay would override the clear statutory mandate of "one and one-half times the regular rate." GNC claimed that under Plaintiffs' formulation salaried employees would receive two and one-half times their regular rate of pay because the salary provides the initial payment for each hour worked and employees would then receive an additional 1.5 times for every hour worked in excess of forty. GNC argued that the FLSA should be used as a guide for interpreting the PMWA, given that the PMWA adopted substantial aspects from its federal counterpart. It contended that if the General Assembly had intended to deviate from the FLSA it would have done so explicitly.

In October 2014, the trial court denied GNC's motion for summary judgment and granted Plaintiffs' motion for partial summary judgment, holding that the FWW Method violated the PMWA. In so doing, the court initially opined that the PMWA and the Pennsylvania Regulations did not provide an unambiguous answer to "the question of whether an employer can use the fluctuating workweek to calculate the overtime pay owed to a salaried employee." Tr. Ct. Op. at 10. The court also recognized that the ambiguity had yet to be resolved by a Pennsylvania appellate court. It next discounted the federal cases, applying Pennsylvania law, which had rejected use of the FWW Method in connection with a specific statutory provision related to...