RadioShack Corp. (RSH:US), the electronics retailer that could run short on cash next year, was found by a federal judge to have violated Pennsylvania law for calculating overtime wages.
While RadioShack’s calculations comply with baseline federal regulations, they violate the state’s more expansive Minimum Wage Act, which requires compensating workers for overtime at 1 1/2 times the basic rate, U.S. District Judge Mitchell S. Goldberg in Philadelphia ruled today. RadioShack said last year that it faces at least $5.8 million in claims for unpaid overtime in the Pennsylvania case.
Former store manager David Verderame sued the chain last year in state court accusing it of shortchanging workers on overtime since April 2010.
RadioShack had the case moved to federal court and asked Goldberg to dismiss the claims. Today’s ruling sets the stage for evidence gathering on potential damages and time-keeping data, Pete Winebrake, an attorney for Verderame, said in a phone interview.
“We’re very pleased with the outcome,” Winebrake said. “Companies that do business in Pennsylvania can’t use that methodology to calculate wages.”
RadioShack used a fluctuating workweek method, paying certain salaried employees at half the regular rate for overtime hours. Goldberg cited two similar cases in which federal judges had ruled that method of calculation impermissible under Pennsylvania law.
A call to RadioShack’s media line after regular business hours wasn’t immediately returned.
RadioShack, which is facing increasing pressure from an industrywide slump in electronics demand, may run short on cash next year, Standard & Poor’s said in a June 16 report. The Fort Worth, Texas-based company faces a significant chance of default in the next year, according to S&P, which lowered the company’s credit rating to CCC.
The case is Verderame v. RadioShack Corp., 13-02539, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).
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