Opinion ID: 859165
Heading Depth: 2
Heading Rank: 1

Heading: FLSA Exemptions

Text: The FLSA establishes the general rule that “no employer shall employ any of his employees … for a workweek of longer than forty hours unless such employee receives compensation … at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a)(1). Nonetheless, certain employees are exempted from that requirement, including individuals who are “employed in a bona fide executive, administrative, or professional capacity.” Id. § 213(a)(1). An employee falls within that exemption if she is “[c]ompensated on a salary or fee basis at a rate of not less than $455 per week,” her “primary duty” is “directly related to the management or general business operations of the employer,” and that duty “includes the exercise of discretion and independent judgment.” 29 C.F.R. § 541.200(a). The employer bears the burden of proving that a purportedly exempt employee satisfies those requirements. See Corning Glass Works v. Brennan, 417 U.S. 188, 196-97 (1974) (“[T]he application of an exemption under the Fair Labor Standards Act is a matter of affirmative defense on which the employer has the burden of proof.”). 5 At issue in this appeal is the “salary basis” component of that test.7 Light Action maintains that, as the District Court concluded, Sander was paid on a salary basis and therefore was an exempt employee not entitled to overtime under the FLSA. Sander disagrees, insisting that, regardless of the terms of her compensation package, she was in fact paid as an hourly employee and thus should have been paid at a rate one and one-half times her normal salary any time she worked more than 40 hours a week. Federal regulations provide that an individual is paid on a salary basis “if the employee regularly receives each pay period … a predetermined amount constituting all or part of the employee‟s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.”8 29 C.F.R. § 541.602(a). In other words, the employee “must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.” Id. Under that standard, employees “who can be docked pay for missing a fraction of a workday must be considered … hourly.” Martin v. Malcolm Pirnie, Inc., 949 F.2d 611, 615 (2d Cir. 1991). On the other hand, employees who receive a fixed, predetermined amount plus an amount that may be subject to deductions are generally not considered hourly employees. Harvey v. Homebound Mortg., Inc., 547 F.3d 158, 165 (2d Cir. 2008) (“A two-part salary scheme in which employees receive a predetermined 7 Sander concedes that her position at Light Action satisfied the “primary duty” requirements. 8 There are a number of exceptions to that requirement. Most notably, full-day absences for personal reasons, sickness, or disability generally can be deducted from the predetermined salary without an employee losing exempt status. 29 C.F.R. § 541.602(b). 6 amount, plus … an additional portion subject to deductions for quality errors does not violate the salary-basis test unless the system is designed to circumvent the requirements of the FLSA.” (internal quotation marks omitted)). Sander argues that she is a non-exempt hourly employee under the FLSA because Light Action “docked” her hours when she worked outside the shop. (Appellant‟s Opening Br. at 8.) Specifically, she complains that, by prorating her hours during weeks in which she had shows, Light Action was improperly deducting money from the “predetermined amount” that she was supposed to receive each pay period. See 29 C.F.R. § 541.602(a). According to Sander, those “partial-day deductions” added up to a total of 241.3 hours, and thus she was effectively docked $6,220.04 from 2007 to 2010. (Appellant‟s Opening Br. at 23.) But the conclusion that Sander was an hourly employee simply does not follow from the undisputed facts of her compensation scheme. Sander does not contest that, on weeks when she did not have any shows, she was paid her standard weekly rate regardless of how many hours she worked. As is clearly demonstrated by her time cards, whether Sander worked 31 hours, 38 hours, or 44 hours a week in the shop, she always earned $1,153.85. Moreover, on weeks in which she worked off-site at events, she earned even more, provided she did not take any sick days or vacation days. The reason that her hours were “prorated” during those weeks was not to deduct anything from her base rate, but rather to ensure that she was paid a premium for the hours she spent offsite. In other words, the additional compensation she earned for working at shows was effectively calculated on an hourly basis, and she was paid that premium on top of her 7 standard weekly salary. The multi-tiered nature of that scheme does not change the fact that Sander earned as part of her compensation package “a predetermined amount … [that was] not subject to reduction.” 29 C.F.R. § 541.602(a); see also Harvey, 547 F.3d at 165 (permitting a similar two-tiered structure). The District Court was therefore correct to conclude that there is no genuine dispute as to whether Sander was a salaried employee, and her claim to FLSA overtime compensation fails as a matter of law.9