Chevalier v. General Nutrition Centers, Inc., 112019 PASC, 22 WAP 2018

Docket Nº:22 WAP 2018, 23 WAP 2018
Opinion Judge:BAER JUSTICE.
Party Name: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 NUT...
Judge Panel:SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ. Justices Todd, Dougherty and Wecht join the opinion. Justice Mundy files a concurring opinion. Chief Justice Saylor and Justice Donohue file concurring and dissenting opinions. MUNDY JUSTICE. SAYLOR CHIEF JUSTICE. DONOHUE JUSTICE.
Case Date:November 20, 2019
Court:Supreme Court of Pennsylvania
 
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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

Nos. 22 WAP 2018, 23 WAP 2018

Supreme Court of Pennsylvania

November 20, 2019

ARGUED: April 10, 2019

Appeal from the Order of the Superior Court entered December 22, 2017 at Nos. 1437 WDA 2016, 92 WDA 2017, affirming in part and reversing in part the Judgment of the Court of Common Pleas of Allegheny County entered December 29, 2016 at No. GD 13-017194 and remanding.

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

BAER JUSTICE.

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 (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...

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