As the result of recent amendments to Department of Labor regulations, many retailers in Pennsylvania, New Jersey, New York and elsewhere are facing unpaid overtime claims challenging their use of the Fluctuating Workweek Method of compensation for overtime eligible employees. “Many referred to the pay system as ‘Chinese Overtime.’” Evans v. Lowe’s Cos., 2004 U.S. Dist. LEXIS 8335, *8 (M.D. Pa. Apr. 29, 2004). Under the Department of Labor Regulations, employers cannot pay bonuses and non-overtime premiums such as, for example, shift differentials, to employees who are paid under the Fluctuating Workweek Method.
In reaction to these lawsuit, many employers argue collective action treatment is not proper because some of the workers paid in this manner were exempt and not eligible for overtime pay in the first place. However, Middle District of Tennessee recently rejected this argument and conditionally certified a class despite this potential defense. See Ott v. Publix Super Markets, Inc., 2013 U.S. Dist. LEXIS 63581 (M.D.Tenn. May 2, 2013).
Due to the complicated requirements of the Fluctuating Workweek or “Half-Time” Method, many employers are improperly paying their workers. This is especially true for retail employees. In addition, the Western District of Pennsylvania recently held that the Fluctuating Workweek Method is not permissible under Pennsylvania law. See Foster v. Kraft Foods Global, Inc., 2012 U.S. Dist. LEXIS 121282, *2-3 (W.D. Pa. Aug. 27, 2012).