Health Care Industry Employers Should Review and Update Overtime Payroll Practices

Posted on December 02, 2011

A few weeks ago, we told you about the proposed regulations to Pennsylvania’s “Act 102,” which prohibits health care facilities from requiring certain employees to work mandatory overtime shifts beyond their predetermined and regularly scheduled daily work hours. We further encouraged all Pennsylvania health care institutions to review their overtime and payroll practices to ensure compliance with Act 102. Yet, for those state health care industry employers who utilize an “8-80” method of calculating overtime, Act 102’s proposed regulations are not the only reason to consider revising existing payroll practices and procedures.

Last year, the Philadelphia Court of Common Pleas found that a hospital system had violated the Pennsylvania Minimum Wage Act (MWA), 43 P.S. § 333.101, et seq, when it calculated workers’ overtime payments based on the Fair Labor Standards Act’s (FLSA) “8-80” method. Turner v. Mercy Health System, 2010 Phila. Ct. Com. Pl. LEXIS 146 (March 10, 2010). While Turner may seem like “yesterday’s news,” its holding remains both significant and relevant as numerous health care institutions throughout the state continue to rely on the “8-80” method to pay their employees. Furthermore, the Turner decision is still the only reported Pennsylvania decision which has addressed the interplay between the FLSA’s “8-80” overtime method and the MWA’s standard “40 hour” overtime pay rule.

As a general rule, the FLSA states that an employer shall not subject its employees to a work week of more than forty (40) hours, without compensating the employees at a special overtime rate. However, the FLSA provides an “8-80” exception to this rule for hospitals, nursing homes, homes for the aged, and certain other medical institutions that provide residential care. 29 U.S.C. § 207(j). The “8-80” exception permits an employer to combine two workweeks together before determining the amount of overtime due to an employee. In other words, a health care industry employer utilizing the “8-80” method would only be obligated to pay a non-exempt employee overtime after the employee worked in excess of 80 hours in a two-week pay period, or more than eight (8) hours in a single workday. Before its implementation, however, the “8-80” overtime payment method requires advance agreement from all affected employees.

The Pennsylvania MWA, conversely, requires employees to be paid overtime wages on a “workweek” basis, which is defined as “a period of 7 consecutive days starting on any day selected by the employer.” 34 Pa. Code § 231.42. Additionally, “overtime shall be compensated on a workweek basis regardless of whether the employee is compensated on an hourly wage, monthly salary, piece rate or other basis.” Id. Language similar to the FLSA’s “8-80” exception is noticeably absent from the state MWA.

The Common Pleas Court in Turner concluded that because the state MWA does not provide for the “8-80” exception, and because the FLSA does not preempt Pennsylvania law on those facts, state health care industry employers cannot rely on the “8-80” provision for calculating overtime payments to non-exempt employees: “this Court finds that the Pennsylvania legislature, having the authority to do so, clearly defined the ‘work week’ period as forty hours . . . thus, since the language of the MWAand the regulations directly applicable to the MWA are clear, this Court must find that the 8-80 Period, as practiced by Defendants, violates the MWA.” Turner, 2010 Phila. Ct. Com. Pl. LEXIS 146, *4-5.

The court’s decision grants a private cause of action under the MWA (or the Pennsylvania Wage Payment and Collection Law), to any employee who believes that he/she has not received proper overtime payments as defined by the state MWA.

It is important to note that the Turner court remains the only Pennsylvania court to address the relationship between the FLSA’s “8-80” rule and the state MWA, and as such, its decision is neither binding nor precedential outside of Philadelphia County. Nonetheless, that decision may act as persuasive authority for other Pennsylvania state courts confronted with similar lawsuits. Therefore, health care industry employers should review their payroll practices, especially those relating to the calculation and payment of overtime, and decide whether to continue those methods which may conflict with the Pennsylvania MWA and/or Act 102.

If you would like to discuss the applicability of the Turner case or Pennsylvania wage laws to your business, or require assistance in reviewing or modifying your payroll policies and procedures, please contact a Knox Labor and Employment attorney at (814) 459-2800.

Article written by Joseph V. Balestrino.

Labor & Employment Department Attorneys

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