TAWNY L. CHEVALIER AND ANDREW HILLER, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED Appellees
GENERAL NUTRITION CENTERS, INC. AND GENERAL NUTRITION CORPORATION Appellants TAWNY L. CHEVALIER AND ANDREW HILLER, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED
GENERAL NUTRITION CENTERS, INC. AND GENERAL NUTRITION CORPORATION Appellants
from the Judgment Entered September 6, 2016 In the Court of
Common Pleas of Allegheny County Civil Division at No(s):
from the Order Entered December 29, 2016 In the Court of
Common Pleas of Allegheny County Civil Division at No(s):
BEFORE: MOULTON, J., SOLANO, J., and MUSMANNO, J.
BEFORE: BOWES, J., SOLANO, J., and PLATT [*] , J.
these consolidated appeals, General Nutrition Centers, Inc.
and General Nutrition Corporation (together, "GNC")
appeal from: (1) the September 6, 2016 judgment entered in
the Allegheny County Court of Common Pleas in favor of Tawny
L. Chevalier and Andrew Hiller, on behalf of themselves and
all others similarly situated (collectively,
"Employees"); and (2) the December 29, 2016 order
granting Employees' petition for counsel fees and
litigation costs. Employees sued GNC on the ground that
GNC's method of calculating their overtime pay violated
the Pennsylvania Minimum Wage Act ("PMWA"), 43 P.S.
§§ 333.101-333.115. The trial court agreed
and granted Employees' motion for summary judgment,
entering judgment in Employees' favor in the amount of
$1, 378, 494.77 plus interest. The court later granted
Employees' petition for counsel fees and costs.
reasons that follow, we hold that: (1) GNC's method of
calculating an employee's "regular rate" by
dividing the employee's salary in a given week by the
number of hours actually worked in that week did not violate
the PMWA; and (2) GNC's payment of an overtime premium of
only one-half the "regular rate" violated the PMWA
and its accompanying regulations. Accordingly, we affirm in
part and reverse in part the trial court's judgment,
vacate the order concerning fees and costs, and remand for
Factual and Procedural History
trial court summarized the background of this case as
[Employees] worked as store managers, assistant managers, or
senior store managers for [GNC] during the period between
2009 and April 2011. [Employees] were salaried employees
whose weekly pay was the same no matter the number of hours
worked. However, when a salaried employee worked more than
forty hours in a workweek, GNC was also required to pay
overtime for the hours worked over the forty-hour workweek.
Both parties agree that the PMWA requires a payment of at
least one and one-half of the employee's "regular
rate" for each hour worked in excess of forty hours.
However, they disagree over how to calculate the
employee's "regular rate."
The following illustration sets forth the method by which GNC
calculates overtime: the salaried employee is paid $1, 000 a
week regardless of the number of hours worked. In a
particular week, the salaried employee worked 50 hours. GNC
divides the weekly pay ($1, 000) by the number of hours
worked (50). This produces a $20 amount which GNC treats as
the employee's "regular rate." GNC divides the
$20 amount by two, which produces a $10 amount. This
represents 50% of the employee's "regular
rate." GNC multiplies the $10 amount by the number of
hours of overtime (10).1 This amount ($100) is paid as overtime. Thus,
for this workweek, the salaried employee is paid $1,
1GNC contends that through payment of salary, the
salaried employee has already received regular pay for each
of the 50 hours or, in other words, the salary covers the
first 100% of the overtime. Thus, the employee is owed only
an additional 50% of the wage as overtime.
2 GNC's method of calculating overtime pay is
called the fluctuating workweek [("FWW")] method of
compensating overtime. . . .
[Employees] contend that the "regular rate" should
be calculated based on what is earned in a forty-hour
workweek. Thus, the "regular rate" should be
calculated by dividing the $1, 000 weekly payment by forty
hours. This produces a $25 per hour amount which [Employees]
treat as their "regular rate."
[Employees] next multiply each hour of overtime by one and
one-half of this dollar amount, which, according to
[Employees], is consistent with the [Fair Labor Standards Act
("FLSA"), 29 U.S.C. §§ 201 et
seq., which uses] a forty-hour workweek. This produces
an amount for ten hours of overtime of $375. Thus, for this
workweek, the salaried employee is paid $1, 375. This will be
referred to as the forty-hour method of compensating
These two methods of calculating overtime produce very
different results. . . .
There is a third construction that neither party has
proposed. The "regular rate" will be based on a
forty-hour week, but for a salaried employee, the salary
covers the first 100% of the overtime.
Trial Ct. Op., 10/20/14, at 1-4 (italics in original).
2014, GNC and Employees filed cross-motions for summary
judgment, limited to the issue of whether GNC's use of
the FWW method to calculate overtime compensation complies
with the PMWA. On October 20, 2014, the trial court granted
Employees' motion and denied GNC's motion,
The General Assembly delegated to the [S]ecretary [of the
Pennsylvania Department of Labor and Industry
("Secretary")] the responsibility for promulgating
regulations interpreting "regular rate." The one
sentence of the PMWA mandating overtime pay provides no
guidance as to whether an employer is permitted to use the
[FWW method] to calculate overtime pay for salaried
employees. The regulations also provide no guidance.
When the words of a statute are not clear, the intention of
the General Assembly may be ascertained by considering the
occasion and necessity for the statute, the mischief to be
remedied, and the object to be attained. Habecker v.
Nationwide Ins. Co., 445 A.2d 1222, 1224 (Pa. Super.
1982); 1 Pa.C.S.A. § 1921.
The purpose of the portion of the PMWA governing overtime was
to alter the behavior of employers. The goal was to cause
employers to hire new workers in lieu of paying existing
employees to work overtime by making overtime more expensive.
A construction of the PMWA that allows the use of the [FWW]
encourages the use of overtime. A method for calculating
overtime that defines "regular rate" as the rate
based on a forty-hour workweek creates a substantial
financial incentive to hire new employees instead of paying
for overtime. Consequently, GNC's use of the [FWW method]
to calculate [Employees'] overtime pay violates the PMWA.
Id. at 21-22.
December 16, 2014, Employees filed a motion for class
certification, which GNC opposed. On July 15, 2015, the trial
court granted Employees' motion, certifying a class of
current and former GNC employees in Pennsylvania who were
paid overtime compensation using the FWW method.
GNC requested additional discovery. On March 15, 2016,
Employees filed a motion for a protective order objecting to
the requested discovery, which the trial court granted. Also
on March 15, 2016, Employees filed a motion to include
commissions in the calculation of Employees' damages for
unpaid overtime. The trial court granted the motion,
concluding that GNC may not use the FWW method of calculating
overtime as to Employees' commissions. See Trial
Ct. Op., 5/11/16, at 3-5.
September 6, 2016, the trial court entered final judgment as
[T]his Court having previously determined that [GNC's]
methodology of calculation of overtime was contrary to
Pennsylvania law, and that a 1.5 multiplier was required to
be applied to a "regular rate" based upon a 40-hour
workweek in the calculation of overtime due the Class, and
furthermore, having certified this matter as a Class Action
on July 15, 2015, and upon being advised that the parties
agree that the sum of $1, 378, 494.77 represents the correct
calculation of the amount of overtime at issue in this case
and that $362, 286.08 represents the correct calculation of
interest as of this date, and that [Employees'] claim for
liquidated damages under the Wage Payment and Collection
Law[, 43 P.S. §§ 260.1-260.12, ] is hereby
dismissed with prejudice, this Court hereby finds and
concludes that this matter is ripe for the entry of judgment.
Thus, the Court hereby enters judgment in favor of
[Employees] in the amount of $1, 378, 494.77 plus interest
calculated at six percent (6%) per annum from the date of the
non-payment of any overtime earned, or $362, 286.08 for a
total sum of $1, 740, 780.85 for interest accruing after the
date of judgment at the statutory rate, plus costs and
attorney's fees and incentive payments in amounts to be
determined through further proceedings.
Trial Ct. Judgment, 9/6/16, at 1-2. On September 29, 2016,
GNC timely appealed from the judgment.
September 15, 2016, Employees filed a petition for counsel
fees, litigation costs, and incentive payments, to which GNC
filed a response. On December 30, 2016, the trial court
awarded counsel fees in the amount of $360, 000 and
litigation costs in the amount of $8, 000 but denied
Employees' request for incentive payments. On January 17,
2017, GNC timely appealed from that order.
raises the following issues on appeal:
A. Whether the [FWW] method of computing overtime
compensation violates the [PMWA]; that is, whether under the
PMWA: (i) the "regular rate" associated with a
non-exempt employee's salary must be determined by
dividing the employee's weekly salary by 40 (rather than
by all hours worked); and (ii) the additional overtime
compensation premium owed on that salary must be calculated
at 1.5 times that "regular rate" for all hours
worked over 40 (rather than 0.5 times the "regular
B. Whether [Employees'] motion for class certification
should have been granted, despite the fact that GNC presented
evidence that putative class members had an agreement or
understanding with GNC that their overtime would be
calculated pursuant to 34 Pa. Code § 231.43(d)(3).
C. Whether 34 Pa. Code § 231.43(d)(3) permits GNC to
calculate overtime compensation pursuant to an agreement or
understanding with class members.
D. Whether under the PMWA: (i) the "regular rate"
associated with a non-exempt employee's commission
earnings must be determined by dividing the employee's
weekly commissions by 40 (rather than by all hours worked);
and (ii) the additional overtime compensation premium owed on
those commissions must be calculated at 1.5 times that
"regular rate" for all hours worked over 40 (rather
than 0.5 times the "regular rate").
E. Whether the trial court was authorized to apply a 1.5
contingency "multiplier" enhancement to the
lodestar when calculating the award of attorney's fees,
where the lodestar already reflected counsel's contingent
GNC's Br. at 4-6 (trial court answers omitted).
"issues present pure questions of law, over which our
standard of review is de novo and our scope of
review is plenary." In re Vencil, 152 A.3d 235,
241 (Pa. 2017); see In re Concord Twp. Voters, 119
A.3d 335, 341 (Pa. 2015) ("Issues of statutory
interpretation are pure questions of law."). Our review
of a trial court's order awarding counsel fees is limited
"to determining whether the trial court palpably abused
its discretion." Thunberg v. Strause, 682 A.2d
295, 299 (Pa. 1996).
FWW Method and the PMWA
central issue in this case is whether GNC's use of the
FWW method to calculate overtime compensation for salaried
employees is consistent with section 4(c) of the PMWA, which
provides in relevant part: "Employe[e]s shall be paid
for overtime not less than one and one-half times the
employe[e]'s regular rate as prescribed in regulations
promulgated by the [S]ecretary." 43 P.S. §
are two components of the FWW method at issue. First, the FWW
method determines the "regular rate" by dividing
the employee's weekly salary by the total number of hours
worked in that week. In other words, the "regular
rate" for a given employee will fluctuate from week to
week as the employee's hours fluctuate. This stands in
contrast to the 40-hour method, advocated by Employees and
adopted by the trial court, under which the "regular
rate" remains constant from week to week. Second, the
FWW method, as employed by GNC, pays the employee in question
an additional overtime premium of one-half of the
"regular rate" for a given week for each hour over
40 worked by the employee in that week, as opposed to one and
one-half times the "regular rate."
Positions of the Parties
argument proceeds as follows: (1) In 1942, the United States
Supreme Court held in Overnight Motor Transportation Co.
v. Missel, 316 U.S. 572 (1942), that the FWW method of
calculating a salaried employee's "regular rate,
" and the resulting overtime payments, was lawful under
the FLSA. (2) In 1968, the Pennsylvania General Assembly
adopted the "regular rate" terminology in the
PMWA's overtime provision. (3) Pennsylvania case law
instructs that, unless a contrary intent appears, when a
Pennsylvania statute tracks the language of a federal
statute, Pennsylvania courts should consult federal authority
for guidance in ascertaining the meaning of the term in
question. (4) Nothing in the text of the PMWA suggests that
the General Assembly intended to give a meaning to
"regular rate" different from that established
under the FLSA. (5) While the PMWA does authorize the
Pennsylvania Department of Labor and Industry
("Department") to promulgate regulations defining
"regular rate, " and the Department could have
promulgated a regulation defining "regular rate" to
prohibit the FWW method, it has not done so, and nothing in
the PMWA regulations that the Department has adopted evinces
an intent to bar the FWW method.
counter that important differences between the PMWA and the
FLSA belie GNC's wholesale-FLSA-incorporation argument.
According to Employees, those differences, along with policy
statements contained in the preamble to the PMWA, demonstrate
that the PMWA was intended to provide greater protection to
employees in Pennsylvania than that afforded by the FLSA. In
particular, Employees point to the language in the PMWA that,
as both parties concede, authorizes the Department to define
"regular rate" differently (and more favorably to
employees) than does federal law. And while Employees admit
that no Pennsylvania regulation expressly prohibits the FWW
method for salaried employees, they emphasize that
Pennsylvania has not promulgated a regulation authorizing the
FWW method. To support the significance of that omission,
Employees point out that the Department has promulgated a
regulation that expressly permits a version of the FWW
method, but only for employees paid at a flat rate per day or
per job. See 34 Pa. Code § 231.43(b). They
contend that the Department's failure to adopt a similar
regulation for salaried employees, as exists in the FLSA
regulations, is telling. Finally, Employees argue that the
FWW method runs directly counter to what they contend is a
fundamental purpose of the PMWA - promoting greater
employment by incentivizing employers to hire more workers
rather than incurring substantial costs in paying overtime to
noted above, both parties agree that: the PMWA authorizes the
Secretary of the Department to promulgate regulations
defining the term "regular rate" as it applies to
salaried employees; the Secretary's authority would
support a regulation either permitting or prohibiting the FWW
method for calculating overtime pay for such employees; and
the Secretary has not exercised that authority in either
direction. In essence, the difference between the
parties' positions is that GNC argues that absent an
express prohibition, the FWW method is permissible, while
Employees argue that absent an express authorization, the FWW
method is impermissible.
Pennsylvania Department of Labor and Industry
September 22, 2017, shortly after oral argument, this Court
issued an order requesting (but not requiring) the views of
the Department concerning "whether the PMWA authorizes
an employer to use the [FWW] method to calculate overtime
compensation for salaried employees." Super. Ct. Order,
9/22/17, at 2. The order further provided:
In particular: (1) is the "regular rate" referenced
in Section 333.104(c) of the PMWA properly determined by
dividing the employee's weekly salary by all hours worked
or by 40; and (2) for hours worked over 40, is the overtime
to be paid to salaried employees an additional one and
one-half times the regular rate, or an additional one-half
times the regular rate.
request was based on several factors, including the
Department's general responsibility for administering and
enforcing the PMWA. Indeed, had Employees in this case so
chosen, they could have filed a complaint with the
Department's Bureau of Labor Law Compliance challenging
the legality of GNC's use of the FWW method for
calculating overtime. Had Employees done so, the Department
would have been authorized to "take an assignment of
such wage claim, in trust for the assigning worker and . . .
bring any legal action necessary to collect such claim."
43 P.S. § 333.113.
addition, GNC supports its interpretation of the PMWA by
reference to a letter issued in 1998 by a deputy chief
counsel in the Department. GNC's Br. at 36, 40-41;
see Ltr. from R. Lengler to J. Harris, 11/12/98
("1998 Letter"). The 1998 Letter appears to be a
response to an inquiry from an attorney for an employer; the
inquiry itself is not in the record. While the letter
suggests that the inquiry did not raise the FWW issue, the
letter did offer some general observations about that method
of calculating overtime.
October 11, 2017, the Department responded to this
Court's order as follows:
The [Department] respectfully responds to the Superior
Court's September 22, 2017 Order requesting that the
Department provide its views regarding whether the [PMWA]
authorizes an employer to use the [FWW] method to calculate
overtime compensation for salaried employees. While the
Department appreciates the opportunity to comment on the
important issue under consideration by the Court, the
Department must respectfully decline the Court's
The subject matter of the Court's request implicates not
merely an interpretation of law but policy choices among
competing positions as to how best to effectuate the intent
of the legislature. The development of guidance to implement
statutory law generally involves public notice and comment,
stakeholder outreach, and coordination within key
Commonwealth agencies. Accordingly, there is a significant
concern that articulation of a formal position on this issue
may be construed as agency rule-making in a manner
inconsistent with the Commonwealth's regulatory review
While the Department is unable to offer its views, the
Department nonetheless looks forward to the Court's
guidance on the contours of the law on this significant issue
of employment law.
Ltr. from M. Sajer to N. Corsetti, 10/11/17, at 1-2.
GNC and Employees submitted briefs in response to the
Department's October 11, 2017 letter. Not surprisingly,
each party argues that the Department's response supports
its respective position. GNC contends that the
Department's letter: (1) confirms that existing
regulations do not address, one way or the other, the
validity of the FWW method under the PMWA; (2) confirms that
the FWW method implicates competing policy considerations
best addressed by either the General Assembly or the
Department through the formal rulemaking process; and (3) did
not repudiate the Department's earlier statement (in the
1998 Letter) affirming the validity of the FWW method.
GNC's Br. in Resp. to Dep't Ltr. at 2-16. Employees,
in contrast, argue that the Department's letter: (1)
effectively rejects the "unofficial observations"
in the 1998 Letter; and (2) supports Employees' view that
absent express authorization for the FWW method in either the
PMWA itself or in duly enacted regulations, use of that
method is prohibited. Employees' Resp. to Dep't Ltr.
measure both aspects of GNC's FWW method of calculating
overtime against the PMWA: (1) calculation of the
"regular rate" by considering all hours worked in a
week (as opposed to 40 hours); and (2) paying overtime beyond
salary at one-half the regular rate (as opposed to one and
one-half times that rate). To assess the parties'
arguments, and to determine the meaning of the relevant
provisions of the PMWA and its ...