On July 5, 2012, Pennsylvania Governor Tom Corbett signed into law House Bill 1820, which amends the Pennsylvania Minimum Wage Act (PMWA) to permit hospitals and residential care establishments in the state to calculate overtime for nonexempt employees using a 14-day, 80-hour workweek, instead of the standard seven-day, 40-hour workweek.

Specifically, the language added to the PMWA states that an employer shall not be deemed to have violated its obligation to pay overtime "if the employer is entitled to utilize, and acts consistently with, section 7(j)" of the Fair Labor Standards Act (FLSA).

Section 7(j) of the FLSA provides that hospitals and other institutions "primarily engaged in the care of the sick, the aged, or the mentally ill or defective who reside on the premises" are permitted to compute overtime using "a work period of fourteen consecutive days" if (1) the employer's use of the "8/80" method of overtime calculation is pursuant to "an agreement or understanding arrived at between the employer and the employee before performance of the work" and (2) the employee is compensated at a rate not less than one-and-one-half times the employee's regular rate for employment in excess of eight hours in any workday and in excess of 80 hours in such 14-day work period.

Prior to this amendment, which was effective immediately upon Governor Corbett's signature, healthcare institutions in Pennsylvania that would have been entitled to use the "8/80" method of overtime calculation under the FLSA had concerns about doing so after the Philadelphia Court of Common Pleas ruled in March 2010 that the "8/80" approach was not valid under the PMWA because the law did not specifically provide for that method of calculation.

What This Means for Employers

The amendment to the PMWA is a significant development for many of Pennsylvania's healthcare employers because it eliminates the recent uncertainty of whether they are entitled to use the "8/80" method of overtime calculation set forth by the FLSA. It is now apparent that hospitals and residential care establishments in Pennsylvania, such as nursing facilities, skilled nursing facilities, assisted living facilities, residential care facilities and intermediate care facilities for individuals with disabilities, are permitted to rely on the "8/80" overtime calculation method as long as employees agree to it in advance. Employers with organized workforces, however, may be required to bargain with unions over any changes to their methods of overtime calculation.

The "8/80" method is likely to be an attractive approach at many healthcare institutions, such as hospitals, where unique scheduling demands of the industry require employees to work longer-than-average workweeks. The "8/80" approach often provides a savings for employers in this regard. For example, if a hospital employee works eight hours per day for seven consecutive days in a 14-day period, that employee would be owed 16 hours of overtime pay under the traditional 40-hour workweek method of calculation. Under the "8/80" method, however, that same employee would receive no overtime pay under those same circumstances. On the other hand, if the employee works 10 hours per day for only three days during a 14-day work period, that employee would be entitled to six hours of overtime pay under the "8/80" approach, but no overtime pay under the traditional approach.

In general, qualified healthcare employers should consider whether using the "8/80" method may be beneficial for their particular scheduling needs and may want to seek legal counsel regarding implementation. It is important to note that the amendment to PMWA is not retroactive, so employers who used the "8/80" approach prior to July 5, 2012, may want to consult legal counsel regarding possible legal consequences of having done so.