Opinion ID: 603849
Heading Depth: 2
Heading Rank: 3

Heading: A Salary Basis

Text: 16 The only material issue in dispute is whether Klein was paid on a salary basis, there is no question that her position at Rush satisfies the exemption in all other respects. The Department of Labor's regulations define a salaried employee in some detail in the interpretations section to the regulations: 17 An employee ... regularly receives each pay period on a weekly or less frequent basis, a predetermined amount constituting all or part of his [or her] compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.... The employee must receive his [or her] full salary without regard to the number of days or hours worked. 18 29 C.F.R. § 541.118(a). The salary must be a predetermined amount, and deductions may not be made for absences occasioned by the employer or by the operating requirements of the business, such as when work is not available. Id. § 541.118(a)(1). Deductions from salary are permissible for absences greater than a day when the employee is absent for personal reasons, id. § 541.118(a)(2), or absent for sickness or disability when the employee has no more leave time. Id. § 541.118(a)(3). Finally, the interpretations allow for [p]enalties imposed in good faith for infractions of safety rules of major significance without affecting an employee's salaried status. Id. § 541.118(a)(5). Safety rules of major significance include only those relating to the prevention of serious danger to the plant, or other employees, such as rules prohibiting smoking in explosive plants, oil refineries, and coal mines. Id. 19 We disagree with defense counsel's claim that this is a case of first impression because of the above section (a)(5). This case concerns whether Rush paid Klein on a salary basis, and if she was therefore exempt from the FLSA. We do not rely solely upon one factor, as the district court did, in concluding that she was not paid on a salary basis.
20 According to the Department of Labor's regulations, in certain circumstances, employers may pay exempt employees additional compensation along with a predetermined amount each pay period without automatically losing the employees' salaried status. 29 C.F.R. § 541.118(b). Some courts have stated, though, that overtime pay is generally inconsistent with a salaried status. Abshire v. Kern, 908 F.2d 483, 486 (9th Cir.1990), cert. denied, 498 U.S. 1068, 111 S.Ct. 785, 112 L.Ed.2d 848 (1991); Brock v. Claridge Hotel & Casino, 846 F.2d 180, 184-85 (3d Cir.1988), cert. denied, 488 U.S. 925, 109 S.Ct. 307, 102 L.Ed.2d 326 (1989). But other courts have upheld overtime compensation for salaried employees in particular situations. See Pautlitz v. Naperville, 781 F.Supp. 1368, 1371 (N.D.Ill.1992) (holding that the better position in that case is to consider the additional pay a bonus scheme). We do not have to hold that overtime is always inconsistent with a salary because the negative comp time part of Rush's comp time policy, along with the overtime provision, help show that Klein was not paid on a salary basis. 21 Rush repeatedly maintains that because Klein's salary was never reduced if she left a shift early or came in late, as it was before the comp time policy, it was a full salary ... without regard to the number of days or hours worked. 29 C.F.R. § 541.118(a). Yet for every hour when she was late or left early, Klein had to use an hour of comp time from her comp time bank or else go into negative comp time. Of course, when a nurse is assigned a particular shift, she cannot simply arrive at work or leave whenever it pleases her; she must necessarily be there when her assigned shift begins and ends. 22 But the regulations have determined that a salaried employee is paid the same regardless of the number of hours worked. Id. An exempt employee's pay cannot be reduced for absences of less than a day according to the regulation's interpretations; permissible deductions are only for absences of a day or more. Id. § 541.118(a)(2)-(3). As the Second Circuit stated: Most courts that have addressed the issue have agreed that if an employer has a policy of reducing an employee's compensation for fractions of days that the employee is absent from work, then the employer may not invoke the ... exemption with regard to that employee. Martin v. Malcolm Pirnie, Inc., 949 F.2d 611, 615 (1991) (listing cases), cert. denied, --- U.S. ----, 113 S.Ct. 298, 121 L.Ed.2d 222 (1992). 23 When Klein was forced to go into negative comp time, she may not have been actually paid less, but she was going into a form of debt since any later accumulated comp time had to pay off that debt. The nurses were discouraged from amassing too much negative comp time, and they could only take their comp time when the unit leader authorized it. Also significant is the fact that Klein's supervisors were not subject to this comp time policy. Cf. Abshire, 908 F.2d at 487 n. 2 (noting that overtime policy did not apply to higher ranked employees). Thus, this negative comp time is similar to docking an employee's pay because of the number of hours worked and is an important factor in our conclusion that Klein was not paid on a salary basis. See id. at 487 n. 3 (dictum) (employees could not qualify as salaried if leave time is reduced for absences less than a day even though pay is not reduced); Benzler v. Nevada, 804 F.Supp. 1303, 1306 (D.Nev.1992); Aaron v. Wichita, 797 F.Supp. 898, 907 (D.Kan.1992); Service Employees Int'l Union v. San Diego, 784 F.Supp. 1503, 1510 (S.D.Cal.1992).
24 The other significant factor relied upon by the plaintiff to establish that as a matter of law she was an hourly employee is the fact that she was subject to unpaid disciplinary suspension for minor infractions. Klein argues the regulation's interpretations only allow employees to be penalized for infractions of safety rules of major significance without altering their exempt status. 29 C.F.R. § 541.118(a)(5). 25 The magistrate agreed with Klein and found that the interpretations's safety rules exception did not protect Rush's Disciplinary Procedures which subjected Klein to suspension for tardiness or rude behavior. The magistrate could not equate an abrupt comment, a lack of cooperation, or a late arrival for a shift with the oil refinery fires and coal mine disasters in the safety rules exception. The magistrate's Report and Recommendation, which the district court adopted with some modification, relied only upon this safety rules section as a basis for finding that Klein was not a professional employee under the FLSA's exemptions and did not address whether Rush's comp time policy also indicated that Klein was paid on an hourly basis instead of a salary basis. Evidently Rush concurs that its disciplinary policy of unpaid suspension should not apply to its exempt employees since it changed its discipline policy to ensure that exempt employees are not suspended except for infractions of safety rules of major significance. 26 We may logically infer that infractions of safety rules of non-major, i.e. minor, significance are not permissible under the interpretations since penalties for infractions of safety rules of major significance are. See Wage & Hour op. letter No. 90-42NR (Mar. 29, 1991) (The only disciplinary type of deduction permissible is one imposed as a penalty 'in good faith for infractions of safety rules of major significance' ) (emphasis added). Particularly because the regulation's chief concern is whether an employee's salary is subject to reduction because of the quality or quantity of work done. See 29 C.F.R. § 541.118(a). 27 Rush contends that the safety rules section should not be relied upon by this court because it has not been enforced by the Department of Labor and is inconsistent with today's modern workplace, even though it has changed its discipline policy for exempt employees. Rush and the amicus curiae brief from an employers management association argue that suspension is an essential disciplinary tool. In an egalitarian argument, Rush claims exempt and nonexempt employees must be subject to the same disciplinary policy. Rush also argues that because the regulation's interpretations do not have the force of law, they should not be mechanically applied without considering the purpose of the salary requirement. Rush attempts to explain that disciplinary deductions which are actually salary deductions are prohibited by the safety rules section while legitimate unpaid suspensions not meant as impermissible salary deductions should not be proscribed by the section. Rush maintains that a bona fide disciplinary suspension of an employee does not offend the principle that a salaried employee must be paid the same regardless of the quality or quantity of his or her work. 28 But the fact remains that Klein's salary was impermissibly reduced on occasion because of her suspensions which resulted from the quality or quantity of her work. This is inconsistent with the regulation's requirement of a salaried employee for the FLSA exemption and inconsistent with the interpretations's definition of a salaried employee. Whatever sympathy we may have for employers trying to effectively discipline employees before resorting to termination, we must defer to the regulations and interpretations. We accord great deference to an agency's interpretations of its regulations, despite that they are not binding on us, because they constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance. Skidmore v. Swift & Co., 323 U.S. 134, 139-40, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944); United Fire Ins. Co. v. Commissioner of Internal Revenue, 768 F.2d 164, 169 (7th Cir.1985); Homemakers Home & Health Care Servs. v. Carden, 538 F.2d 98, 101 (6th Cir.1976). Thus we believe that Rush is subject to the safety rules section in the interpretations. 29 Rush alternatively argues that Klein's suspensions were permissible under the safety rules section because they were for infractions of safety rules of major significance. Rush contends that in at least three of the four suspensions, Klein was suspended for unsafe nursing practices which is equivalent to the section's permissible penalties for violations of safety rules of major significance. Rush discounts the fact that Klein was also subject to suspension for tardiness, rude behavior, or personal appearance. Rush believes that because Klein never was actually suspended for those minor infractions, she should not lose her exempt status. Thus when the regulation's interpretations state that a salaried employee's pay is not subject to reduction because of variations in the quality or quantity of the work performed, 29 C.F.R. § 541.118(a), a reduction of salary must have actually occurred for an employee to lose the exemption. 30 The courts are not in agreement on this issue of whether an employee subject to an impermissible deduction but never affected by it loses his or her exempt status. Compare Martin, 949 F.2d at 617 (subject to does not require that deduction actually made); Abshire, 908 F.2d at 487 (same); Harrison v. District of Columbia, 1991 WL 104260, at , 1991 U.S.Dist. LEXIS 4992, at  14 (D.D.C. April 16, 1991) (same) with Atlanta Professional Firefighters Union v. Atlanta, 920 F.2d 800, 805 (11th Cir.1991) (employee's salary was not subject to reduction if no deduction ever made); Harris v. District of Columbia, 709 F.Supp. 238, 241-42 (D.D.C.1989) (same). 31 Although we have never previously faced this issue, we find that the regulation's interpretations do not require that a deduction have actually been made from an employee's salary. Subject to reduction does not mean that a reduction was actually made. The plain meaning of the language suggests that it is enough that a deduction could have been made for an impermissible reason. 32 The impermissible deductions that could have been made here would have been from unpaid suspensions as a result of any violation of Rush's Code of Conduct such as tardiness or rude behavior. These deductions would have been impermissible because they are wholly unrelated to the penalties for infractions of safety rules of major significance which do not affect an employee's exempt status. 29 C.F.R. § 541.118(a)(5). Klein came very close to being suspended because of lateness, she was twice put on a formal discipline plan because of her tardiness. And she was actually suspended for rude behavior on September 27, 1989. This suspension cannot fairly be considered a matter of patient safety. The examples in the interpretations are those relating to the prevention of serious danger, id., and it would appear to us that only a serious neglect of nursing duties could possibly rise to the level of serious danger. In a Wage & Hour opinion letter, the Acting Administrator stated: Disciplinary deductions made from the salary of a [registered nurse] for violating rules relating to patient well-being and job performance are not the type of deductions that would be permitted by section 541.118(a)(5) of the regulations. Wage & Hour op. letter No. 90-42NR (Mar. 29, 1991). Thus Rush's discipline policy of suspension for instances such as lateness or rude behavior in combination with its comp time policy show that Klein was not considered a professional employee at Rush and not paid on a salaried basis. 33 Several district courts, including the district court in this case, have expressly relied upon the improper discipline of an employee in finding that the employee is not a salaried employee. In Pautlitz v. Naperville, 781 F.Supp. 1368 (N.D.Ill.1992), Judge Plunkett found the City of Naperville's discipline policy was inconsistent with employment on a salary basis because police sergeants' paychecks were subject to reduction for violations of rules that were not of major significance. Id. at 1372-73. Similarly, in Service Employees International Union v. San Diego, 784 F.Supp. 1503 (S.D.Cal.1992), the district court found the employer's rules providing for suspensions because of violations of rules which had nothing to do with safety violations were inconsistent with a salaried status. Id. at 1511. Two courts of appeals have indicated some support for this reasoning either indirectly or in dictum. See Atlanta Professional Firefighters Union, 920 F.2d at 805 (because city ordinance requiring docking of employees' pay for lateness was never used, compensation was never reduced because of quality or quantity of work); Abshire, 908 F.2d at 483 (dictum) (clearly exempt employees were not subject to salary deductions for tardiness like the nonexempt plaintiffs).