Philadelphia Court of Common Pleas Holds “8 and 80” Overtime Formula Violates State Minimum Wage Law
by:Labor and Employment Practice
Hospitals, nursing homes, and similar employers throughout the country routinely pay their employees pursuant to an "8 and 80" overtime rule, under which employees are paid overtime for all hours worked in excess of eight in a single day, and all hours worked in excess of 80 in a two-week period. Section 7(j) of the Federal Fair Labor Standards Act (the FLSA) specifically allows this practice for hospitals and other "institution[s] primarily engaged in the care of the sick, the aged, or the mentally ill or defective who reside on the premises." Under Section 7(j), if a hospital comes to an agreement with its employees to implement an "8 and 80" rule, it need not pay its employees overtime for hours worked in excess of 40 in a single workweek.
A recent decision handed down by a judge in the Philadelphia Court of Common Pleas-Pennsylvania's trial-level court-has called that practice into question. In a case of first impression, the court granted summary judgment for plaintiffs and held that hospital workers paid overtime based on an "8 and 80" overtime provision are entitled to damages for unpaid overtime-calculated based on a 40-hour workweek-under the Pennsylvania minimum wage law. Turner v. Mercy Health Sys., et al., Nos. 3670 & 5155 (Phila. Ct. Com. Pl. filed Mar. 10, 2010).
The court held that Pennsylvania's minimum wage law, the Pennsylvania Minimum Wage Act (PMWA) does not explicitly provide for an "8 and 80" overtime payment method for hospitals and other medical facilities. According to the court, section 7(j) of the FLSA does not preempt Pennsylvania from requiring that all employees-including hospital workers-be paid overtime for hours worked in excess of 40 in a single workweek. Turning to the language of the PMWA, the court found that the PMWA unambiguously requires Pennsylvania hospitals to pay overtime for all hours worked in excess of 40 in a single workweek. Therefore, the court concluded, healthcare employers in Pennsylvania could not rely on the FLSA's "8 and 80" overtime payment method for calculating overtime obligations to hourly employees.
The hospital system countered with arguments based on the legislative history of the PMWA, an opinion letter from the Pennsylvania Department of Labor and Industry Bureau of Labor Law Compliance (the state equivalent of the U.S. Department of Labor), and the regulations promulgated under the authority of the PMWA, all of which, according to the defendant, supported a ruling that the PMWA tracks the FLSA in adopting the "8 and 80" overtime payment method. The court rejected these arguments, finding that the statutory language was unambiguous and therefore, the defendant's evidence could not be considered in interpreting the PMWA.
Although the issue of damages was not before the court, the opinion stated that any recovery by the plaintiffs would be offset by overtime that the class members received for hours worked in excess of eight per day.
If followed by other Pennsylvania courts, this opinion has the potential for a sweeping impact on hospitals throughout the state, many of which pay their employees based on the "8 and 80" method pursuant to a collective bargaining agreement, or as a matter of policy. Although the FLSA provides that state laws may provide broader protections to workers than the federal statute, many states have interpreted their laws in a manner consistent with the FLSA.
While this recent decision is based solely on the PMWA, healthcare systems in other states are vulnerable if the state minimum wage law does not contain the language of Section 7(j) of the FLSA. Hospitals throughout the country have relied for years on the FLSA provision in adopting "8 and 80" overtime rules to satisfy state requirements. Hospitals, nursing homes, and similar employers that pay overtime based on an "8 and 80" rule should assess the risk of class action suits under state laws that guarantee overtime for all hours worked in excess of 40 in a single workweek.
If you have any questions or would like more information on any of the issues discussed in this LawFlash, please contact any of the members of the firm's Labor and Employment Practice, or any of the following Morgan Lewis attorneys:
Christopher K. Ramsey
Richard G. Rosenblatt
Anne Marie Estevez
Sari M. Alamuddin
Ann Marie Painter
Nancy L. Patterson
John S. Battenfeld
Barbara J. Miller