Opinion ID: 2576453
Heading Depth: 1
Heading Rank: 8

Heading: Is Accrued Leave Salary?

Text: The district court lastly asks whether accrued leave is salary and cites to a comparison between two Ninth Circuit cases, Abshire, 908 F.2d at 487 n. 3 and Barner v. City of Novato, 17 F.3d 1256, 1261-62 (9th Cir. 1994). It appears that the district court is seeking clarification as to whether this court specifically rejected the Barner holding when we favorably quoted the Abshire footnote in the discussion of partial day deductions from an employee's accrued leave in Drinkwitz. Drinkwitz, 140 Wash.2d at 303, 996 P.2d 582. As previously discussed, we quoted the Ninth Circuit's footnote as support for our holding that deductions from accrued leave are a factor to consider in determining whether an employee is salaried or hourly. Id. (quoting Abshire, 908 F.2d at 487 n. 3); see also infra p. 1192. In Abshire, the Ninth Circuit decided the issue of whether employees whose salary was subject to deduction for absences of less than one day were paid on a salary basis according to the regulations implementing the FLSA. Abshire, 908 F.2d at 484. The court held that such practice destroys an employee's status as salaried. Id. at 487. In dicta, the Ninth Circuit made its comment that a strong argument could also be made that deduction only from fringe benefits, such as leave time, destroys salaried status. Id. at 487 n. 3. However, the Ninth Circuit did not have to decide the accrued leave issue in that case. Four years later in Barner, the Ninth Circuit was presented with the actual issue of whether deductions from accrued leave affect an employee's salaried status, and the court declined to follow the dicta from Abshire. Barner, 17 F.3d at 1261. Instead, in analyzing the federal definition of salary basis, the court held that the statute's references to amount and compensation in the phrase, `[a]n employee will be considered to be paid `on a salary basis' ... if ... he regularly receives ... a predetermined amount constituting all or part of his compensation,' refer only to cash or salary and not to all forms of compensation. Id. (emphasis added) (quoting 29 C.F.R. § 541.118(a)). As held, deductions from an employee's accrued leave time do not affect an employee's status as salaried as within the meaning of the FLSA. Id. at 1262. Webster correctly points out that this court quoted the Abshire dicta with approval in Drinkwitz and with the full knowledge that the Ninth Circuit had chosen not to follow the Abshire comment in Barner. Drinkwitz, 140 Wash.2d at 303, 996 P.2d 582. Webster also notes that Barner was decided six years prior to Drinkwitz, and this court was well aware that Abshire was no longer followed in the Ninth Circuit. Nonetheless, we did not adopt the Barner rule. Rather than holding an employer's policy or practice of making deductions from accrued leave as immaterial to whether an employee is exempt from the MWA, we held it as a factor to consider. Id. PSE attempts to align Drinkwitz with the Barner decision by construing this court as holding that deductions from leave time can be used as circumstantial evidence of nonexempt status only if connected to a policy or practice of impermissible deductions from base pay. But as discussed, Drinkwitz holds no such thing, and deductions from leave time are a factor to consider even in the absence of improper pay docking. See infra p. 1192. PSE also argues that paid leave is not part of an employee's salary, as defined by the federal salary basis test, and while it is part of an employee's overall compensation, it is a fringe benefit employees receive above and beyond their base pay. 29 C.F.R. § 541.118(a). PSE argues that since we adopted the federal definition of salary basis in Drinkwitz, salary does not include paid leave time for purposes of exemption from the MWA. PSE is correct that we applied the definition of salary basis, 29 C.F.R. § 541.118(a), to the term as used in the DLI regulations promulgated under authority from the MWA. Drinkwitz, 140 Wash.2d at 299-300, 996 P.2d 582; WAC 296-128-520. The definition of salary is not different under the MWAit is the fixed, predetermined amount of compensation an employee receives. The test, however, for whether an employee is exempt from the MWA as a bona fide executive, administrative, or professional employee is broader than under the FLSA. RCW 49.46.010(5)(c); WAC 296-128-520. The MWA's test for exemption considers not only the federal salary basis test, but also allows the court to consider policies and practices that do not affect base pay. Drinkwitz, 140 Wash.2d at 301-05, 996 P.2d 582. The court determines whether an employer has preserved an employee's salaried status by considering the entire context of the employment relationship, and consequently, deductions from accrued leave time may factor into the court's determination. Id. Thus, in response to Question 3, accrued leave is not salary as defined by federal regulations implementing the FLSA. In sum, we answer the district court's certified questions as follows: A single improper deduction from an employee's salary does not preclude finding that he or she is salaried because a single incident does not render the employee subject to improper pay docking. Drinkwitz, 140 Wash.2d at 304, 996 P.2d 582 (citing Auer, 519 U.S. at 461, 117 S.Ct. 905). Since a single improper pay deduction does not affect salaried status, it makes no difference when the statutory limitations period expired. In the absence of deductions from pay, partial-day deductions from accrued leave banks are not per se a violation of the MWA but may be considered by the court in its determination of whether an employee is exempt from the requirements of RCW 49.46.130(2). Drinkwitz, 140 Wash.2d at 303, 996 P.2d 582. Accrued leave time is not salary as defined by 29 C.F.R. § 541.118(a). ALEXANDER, C.J., JOHNSON, SANDERS, IRELAND, BRIDGE, CHAMBERS and OWENS, JJ., and SMITH, J. Pro Tem., concur.