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Ruling may put Pep Boys on hook for overtime pay

Pep Boy mechanics aren't paid by commission.

Pep Boy mechanics aren't paid by commission.

That ruling by a federal appellate panel earlier this month may make the Philadelphia-based auto-parts and service company liable for millions of dollars of overtime pay for 140 to 200 current and former mechanics.

And that would be the other shoe to fall in the six-year-old overtime pay case that has already cost the company millions of dollars involving pay for 5,600 Pep Boys employees.

The May 15 ruling sends the case back to district court in Nashville for further action.

In 2002, mechanics along with clerks and assistant managers sued Pep Boys - Manny, Moe & Jack - alleging that they had not received overtime because their hours had been shaved off their pay records and they had to work off-the-clock, both during lunch and after hours. Pep Boys rejected the allegation.

The biggest chunk of the case, filed in federal court in Nashville, was settled in 2005, after the judge certified it as a class action. The amount of the settlement is confidential and applied to every category of worker - except mechanics.

The rest of the case involving mechanics hinges on the difference between the commonsense definition of "commission," like the cut of the price that a real estate agent earns when selling a house, and the legal labor definition of commission, which is much more complicated.

And that is why Pep Boys can advertise that they do not pay mechanics a commission, but yet insist in court that they do. Commission employees are not eligible for overtime.

Pep Boy mechanics, according to a lower court opinion by U.S. District Judge Aleta A. Trauger, get paid by a flat-rate system. Every job that comes into the shop is assigned a set amount of hours. The mechanic gets his hourly rate times the set amount of hours. If he finishes the job more quickly, he makes more money.

That "incentive to hustle," Pep Boys says, amounts to a commission under labor law.

But for it to be a true commission, the judge wrote, there should be a proportional link between what the mechanic gets paid and the customer gets charged. Because Pep Boys bundles its services and for other reasons, that proportional link is not there.

"No reasonable jury could find that [Pep Boys'] system of compensating . . . qualifies as commission," she wrote in her opinion, which was affirmed.

Plaintiffs' attorney Gregory K. McGillivary, of Woodley & McGillivary, a Washington firm that specializes in overtime cases, said that mechanics typically worked 10 to 40 hours a week overtime and had every incentive to not complain, even though they weren't getting paid overtime. Their vacation and sick pay were tied to their productivity.

Mechanics earn between $15 and $23 an hour, the lawsuit said. If 140 mechanics, earning $20 an hour, worked 10 hours over 40 hours for 50 weeks a year for three years, Pep Boys would owe at least $2.1 million, by Inquirer calculations.

Michael Banks, the Morgan Lewis & Bockius L.L.P. lawyer in Philadelphia who represents Pep Boys, said that mechanics typically liked the compensation package.

"The really good mechanics like incentive-pay systems. They can make more money being efficient," he said. Incentive pay helps attract and retain mechanics, who are, he said, in short supply.

Of the 90,000 Pep Boy workers who could have been involved in the class-action case, which includes those employed between 1999 and 2000, 5,600 opted in.

Mechanics who have worked at Pep Boys in the last three years would have to file their own lawsuits if they thought they should have received overtime, McGillivary said.

Pep Boys, founded in 1921, employs 12,070 nationwide - 1,790 in Philadelphia - and operates 562 stores and supercenters with 5,845 service bays.