Kraft’s Overtime Policy Melts Under Pennsylvania State Overtime Law

A district court in the Western District of Pennsylvania recently denied Kraft’s motion for summary judgment in a class action alleging the Kraft did not pay its employees proper overtime wages.  Judge Bissoon held that payment of overtime under the fluctuating workweek method, at one-half times an employee’s regular rate, as opposed to one and one-half times, was not in compliance with the Pennsylvania Minimum Wage Act.

Under a fluctuating workweek method an employee is paid a fixed, weekly salary, regardless of the number of hours worked.  Each week, an employee’s fixed salary is divided by the number of hours worked during the week in order to determine the employee’s regular rate of pay.  Because the fixed salary is meant to pay the employee upfront for some of their overtime, an employee is paid one-half their regular rate for every hour worked over 40 hours, instead of one and one-half times their regular rate.

Judge Bissoon explained that “a plain reading of [the Pennsylvania Minimum Wage Act] Section 231.43(d) requires Defendant to pay its employees in question at a ‘rate not less than 1 ½ times the rate established by the parties’ agreement or understanding as the basic rate.”  Kraft admitted that it paid its employees only one-half time for all hours worked in excess of 40 hours, which was consistent the fluctuating workweek method under the Fair Labor Standards Act.  The Court, however, held that “[h]ad the Pennsylvania regulatory body wished to authorize one-half-time payment under Section 231.43(d), it certainly knew how to do so.”

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.