Retailer learns the hard way: State law can be more stringent than FLSA
With all the attention paid to complying with federal wage-and-hour laws, it’s easy for state pay laws to get overlooked. That becomes a major issue when those state laws are more stringent than the Fair Labor Standards Act (FLSA).
That’s one of the major takeaways from a recent lawsuit involving electronics giant RadioShack Corp. (RSH).
A federal judge just ruled that struggling retailer violated Pennsylvania state law because of the way it calculated employees’ overtime wages.
The case stemmed from a lawsuit by a former PA store manager that accused RadioShack of stiffing workers on overtime payments since 2010. In response, RadioShack had the case moved to federal court and asked a judge to dismiss the OT claims.
But that plan backfired when the judge ruled against the company. The judge said that although the company’s OT calculations do comply with federal regs, they violate the more expansive state law, the Minimum Wage Act, which businesses operating in PA must abide by.
So the next stage of the lawsuit will deal with determining specifics and awarding damages, which has been cited as around $5.8 million in unpaid overtime claims.
Fluctuating workweek at issue
Specifically, here’s where RadioShack ran into problems: Although the FLSA allows employers to use a “fluctuating workweek” to determine employees’ OT, PA’s Minimum Wage Act does not.
Under the fluctuating workweek method, employees receive a guaranteed fixed weekly salary for all straight-time hours — regardless of the number of the hours they actually work. Then, they earn an additional one-half of their regular rate for all hours worked over 40 in a single workweek.
The method allows employers to divide workers’ weekly salaries by the number of hours they actually work to determine their regular rate. And, under the FLSA, as long as the employee’s regular rate of is more than the federal minimum wage, employers can compensate that employee for any hours worked over 40 in a single week with not less than one-half the regular rate of pay.
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