Reinforcing the basic rule that employers must comply with both state and federal wage and hour laws, a Pennsylvania employer recently learned the hard way that the “fluctuating workweek method of paying overtime” is not allowed in Pennsylvania.

Under the federal Fair Labor Standards Act, an employer may use the fluctuating workweek method to pay certain employees overtime at the rate of one-half of the employee’s regular rate, as opposed to the standard overtime rate of one-and-one-half times the employee’s regular rate. The FLSA allows this treatment if (1) the employee is paid a base salary above minimum wage every week, regardless of hours worked; (2) the employee’s hours fluctuate from week to week; and (3) there is a “clear mutual understanding” that the salary covers all hours during the workweek, regardless of hours worked.

In Foster v. Kraft Foods Global Inc., Kraft paid a sales representative under the fluctuating workweek standard. After her employment ended she sued under the Pennsylvania Minimum Wage Act, alleging that Kraft had failed to pay her overtime at the rate of one-and-one-half times the regular rate.

The federal court for the Western District of Pennsylvania refused to dismiss her claim, despite Kraft’s apparent compliance with the FLSA, noting that Pennsylvania law does not allow payment of overtime by the fluctuating workweek standard, and citing two prior court decisions that reached the same conclusion.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.