A recent case out of the Philadelphia Court of Common Pleas is calling into question whether Pennsylvania health care institutions can rely on the 8/80 method of overtime calculation available under the Federal Fair Labor Standards Act (FLSA). Specifically, under Section 207(j) of the FLSA, as an alternative to the standard requirement to pay overtime to employees for hours worked in excess of 40 per workweek, hospitals, nursing homes, homes for the aged, and certain other medical institutions who provide residential care are permitted to pay their non-exempt employees one and one-half times their regular rate for all hours worked in excess of eight in a workday and 80 in a 14-day period. However, this alternative is not specifically carved out in the plain language of the Pennsylvania Minimum Wage Act (PMWA). Yet, health care institutions across the Commonwealth have a long history of using the 8/80 method under the FLSA.

 

In Turner v. Mercy Health System, the court addressed whether a health system was permitted to use the 8/80 rule under the PMWA. Ruling for the plaintiffs, the court found that the hospital was not allowed to use the 8/80 arrangement, and workers paid overtime based on the FLSA’s 8/80 overtime provision are entitled to damages for unpaid overtime based on a 40-hour workweek pursuant to the PMWA. This is the first reported decision addressing the interplay between the FLSA’s 8/80 overtime system and the PMWA’s strict 40 hours per workweek overtime requirement.

 

By way of further background, the 8/80 provision allows the health care institution to pay its nonexempt employees one and one-half times their regular rate for all hours worked in excess of eight in a workday and 80 in a 14-day period. Prior to implementing the 8/80 arrangement, however, a health care institution must reach an agreement or an understanding with its employees regarding the 8/80 rule before work is performed. In contrast, the PMWA, which contains no such provision, mandates simply that nonexempt employees who work in excess of 40 hours in a given workweek be paid overtime.

 

In Turner, the court held that because the PMWA does not explicitly provide for the 8/80 overtime payment method, and because the FLSA does not preempt Pennsylvania law from requiring that all employees, including health care workers, be paid overtime for hours worked in excess of 40 in a single workweek, the 8/80 rule is not valid under the Pennsylvania wage and hour laws. Accordingly, the court concluded that health care employers in Pennsylvania may not rely on the FLSA’s 8/80 overtime provision for calculating overtime obligations to nonexempt employees.

 

The court specifically rejected arguments by the hospital system that, based on the legislative history of the PMWA, an opinion letter from the Pennsylvania Department of Labor and Industry, and the regulations promulgated under the authority of the PMWA, the PMWA tracks the FLSA with respect to the 8/80 overtime payment method, and, as such, the provision is permissible in Pennsylvania. In rejecting these arguments, the court found that the statutory language of the PMWA was unambiguous, and, as a result, the hospital system’s arguments were irrelevant to the analysis.

 

If this decision is followed by other Pennsylvania courts, it could potentially have a far-reaching impact on health care institutions throughout Pennsylvania due to the fact that many of these entities rely on the 8/80 rule to pay their employees. However, while this court’s decision is neither binding nor precedential outside of Philadelphia County, it may act as persuasive authority for other Pennsylvania courts to consider in the likely event that additional lawsuits are filed across the state. Also note that the ruling may become binding on Pennsylvania health care employers in the event that the decision is appealed to the Pennsylvania Superior and Supreme Courts and the decision is affirmed.

 

Undoubtedly, this decision will spawn a flood of “copycat” filings by enterprising plaintiff’s attorneys. As a result, all Pennsylvania health care institutions should immediately begin to conduct a review of their payroll practices and policies in order to assess their liability in the event that this decision becomes binding. At this point, health care employers that use the 8/80 method of overtime need to decide whether to continue this method with its attendant risks, or phase it out in favor of the standard 40 hour workweek method of overtime compensation. If you would like more information on evaluating your options going forward, please contact Jennifer Craighead (717-399-1523), Jill Welch (717-399-1521) or Rick Hackman (717-852-4978) of our Labor and Employment Group.

 

We will update you as events unfold.