Creative Overtime Law Policy Won’t Help Kraft

PITTSBURGH (CN) - Kraft cannot spin state overtime law to pay employees half their basic rate instead of 1 1/2 times that amount, a federal judge ruled.

Seeking a summary judgment for a class action filed by former employee Terri Foster in 2009, Kraft argued that its employees knew about its fluctuating workweek method to calculate overtime compensation.

This method assigns a fixed salary that partially compensates for overtime hours up front, and then pays workers one-half their regular rate for every overtime hour worked.

Kraft claimed that the policy is permissible under the Pennsylvania Minimum Wage Act because its employees understand it.

Unconvinced, U.S. District Judge Cathy Bissoon said last week that the argument "presents a textbook example of trying to force a square peg into a round hole."

Bissoon notes that the Krafts lawyers tried to use the same argument about a fluctuating workweek, or FWW, when defending Frito Lay against overtime claims.

In that case, the court "held that the defendant's payment of overtime under the FWW method, at one-half times the regular rate, failed to satisfy Pennsylvania Code Section 231.43(d), because that section expressly requires overtime payment at a rate of one and one-half times the regular rate," Bissoon wrote.

Kraft "admittedly paid the employees only one-half time for all hours worked in excess of forty, consistent with the FWW method under the FLSA," she added. "Had the Pennsylvania regulatory body wished to authorize one-half-time payment under Section 231.43(d), it certainly knew how to do so."

Quoting U.S. District Judge Joy Conti's opinion in Cerutti v. Frito Lay, Bissoon wrote: "While it might be convenient for ... multi-state employers if federal law and Pennsylvania law were identical on the issue of overtime compensation, the fact is that they are not."

"The universe of legal authority addressing the permissibility of the FWW method under the PMWA is a relatively closed one," Bissoon added, abbreviating Pennsylvania Minimum Wage Act. "The undersigned, like Judge Conti, need not predict whether Pennsylvania courts would recognize the FWW method as permissible under the PMWA. The undersigned joins, Judge Conti, however, in holding that the payment of overtime under the FWW method at on-half times the regular or basic rate, as opposed to one and one-half times (or more), is impermissible under the plain language of 32 Pa. Code 231.43(d)(3)."

Kraft could not support its salary scheme even by pointing out that the inflated base is designed to account for overtime.

"While this is, no doubt, the rationale under the FWW method under federal regulations, the fact remains that nowhere in 34Pa. Code 231.43(d)(3) is it stated or implied that the '1 ½ times' means payment of '1 times' under a 'salary,' and '1/2 times' through additional overtime compensation," Bissoon wrote. "Had the regulators meant that overtime should be compensated at an 'extra half-time pay' rate, they could have said so as they did in Section 231.43(b)."

Kraft had also tried to argue that lead plaintiff Terri Foster did not actually work more than 40 hours in a week, but this claim failed as well.

"Read in a light most favorable to her, Plaintiff's testimony presents issues of material fact regarding whether she did, in fact, work overtime, whether defendant knew or should have known that plaintiff worked overtime, and whether defendant forbade or discouraged her from working overtime," Bissoon wrote.

The 13-page decision nevertheless refuses to certify a class.

Over Kraft's objections about an unfair delay, Bissoon also gave Foster leave to add new named plaintiffs in an amended complaint.

"Having now taken a second opportunity to exhaustively litigate the FWW issue in the court, defense counsel's complaints of prejudice ring hollow," Bissoon wrote. "As to delay, while Plaintiff's counsel could and should have addressed issues regarding the appropriateness of class representative(s) sooner, denying leave to join additional plaintiff(s) would only encourage the prosecution of another lawsuit, thereby resulting in further delay. ... Under the specific circumstances presented, the court concludes that the interests of justice and efficiency promoted by granting leave to amend outweigh defendant's assertions of undue prejudice and delay."

Bissoon said a settlement conference could be productive at this juncture.

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