Opinion ID: 2747926
Heading Depth: 2
Heading Rank: 1

Heading: The Plaintiffs' FLSA Claim

Text: The FLSA requires employers to pay nonexempt employees at a higher rate for hours worked beyond 40 hours in a week. 29 U.S.C. § 207(a)(1). The FLSA exempts from its overtime protection any employee employed in a bona fide executive, administrative, or professional capacity. Id. § 213(a)(1). The FLSA implementing regulations further provide that this exemption applies to highly compensated employees who (1) customarily and regularly perform[] any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee; (2) receive at least $100,000 in total annual compensation; and (3) receive at least $455 per week paid on a salary or fee basis. 29 C.F.R. § 541.601(a), (b)(1). Saint Consulting argues, and the district court agreed, that the plaintiffs satisfied these three requirements. The plaintiffs concede that they satisfied the duties requirement and earned well over $100,000 annually during the relevant time period, but they argue that they were not paid any amount on a salary . . . basis. This appeal therefore depends on whether Saint Consulting paid the $1,000 stipend on a salary basis within the meaning of 29 C.F.R. § 541.602(a). The stipend was paid on a salary basis if -6- it was (1) a predetermined amount, (2) constituting all or part of the employee's compensation, and (3) not subject to reduction because of variation's in the quality or quantity of the work performed. Id. § 541.602(a). There is no dispute that the stipend was a predetermined amount of $1,000 per week. The plaintiffs' arguments instead apply to the latter two requirements. The plaintiffs first direct us to two communications from Saint and Fox that, according to plaintiffs, show that the $1,000 stipend was subject to reduction because of variations in the . . . quantity of work performed. Id. The first is a lengthy email from Saint instructing managers to document instances in which a project manager refused assignments or available billable hours outside of their geographic division. After reading the email in its entirety, however, it is clear that Saint was trying to make sure his company satisfied project managers who wanted to make more than $100,000 per year, and not suggesting that the company would reduce stipends.4 Notably, in that same email Saint 4 It appears that the amount of hours assigned to project managers varied greatly, in part because some division managers did not trust certain project managers. The pertinent parts of the email read Each of our project managers was told when they were hired they could make $100,000 a year or more from billed hours. . . . We need to do everything we can to insure each and every project manager is getting as many hours as they want, at least up to 45 or 50 a week. How is it fair that some project managers get 75 or 80 hours to bill week in and week out while other[s] get[] 25 or 30? -7- explained that project managers had a minimum fixed cost to Saint Consulting of $72,000 a year ($1,000 a week minimum and benefits), which suggests that Saint did not consider it a possibility to reduce the $52,000 per year in weekly stipend payments. The second communication, by contrast, does speak to the possibility of not paying the stipend. It is a brief message from Fox instructing managers that the stipend is not to be used like vacation time. If there are hours available for a project manager to bill and they choose not to do the work, they need to use vacation time. We will not pay the stipend in that situation.” But the plaintiffs identify no instance where Saint Consulting actually reduced or did not pay the stipend. Without any evidence that Saint Consulting had an actual practice of reducing the $1,000 stipend for any project manager, and with an undisputed record showing no project manager was paid less than the stipend amount, . . . I understand that some [project managers] who have been offered . . . out-of-division hours in the past have declined . . . . We need to document these offers and responses. . . . I do not want to have any more debates with a disgruntled employee whether they were offered hours and refused or whether the division manager simply chose not to assign them enough hours. Nor do I want to open us up for charges of discrimination. -8- this single email cannot demonstrate that plaintiffs' pay was actually subject to improper deductions. See 29 C.F.R. § 541.603(a) & (b) (requiring [a]n actual practice of making improper deductions for an employer to lose the exemption); see also 69 Fed. Reg. 22,122-01, 22,181 (Apr. 23, 2004) ([A] corporate-wide policy permitting improper deductions is some evidence that an employer has an actual practice of not paying employees on a salary basis, but not sufficient evidence by itself to cause the exemption to be lost if a manager has never used that policy to make any actual deductions . . . .). Even if Saint Consulting did require project managers to use vacation time when they rejected available hours, this would only show that the project managers' vacation time, and not their salary, was subject to deduction. See McBride v. Peak Wellness Ctr., Inc., 688 F.3d 698, 705-06 (10th Cir. 2012) (employer permissibly deducted employee's accrued leave for partial day absences). The plaintiffs also point to the paystubs generated by Saint Consulting's payroll company. These paystubs show hours times hourly rate, with no express reference to hourly pay. In other words, if an employee earning $50 per hour works 21 hours, the paystub reflects $50 times 21 as equaling gross pay of $1050. The plaintiffs argue that for the exemption to apply, the paystub formula need have been something like $1,000 + (# of hours - -9- 20)($50). In short, the plaintiffs contend that the stipend does not exist except when hours times hourly rate falls below $1,000. This argument elevates form over substance, and simply ignores the economic reality of the guarantee. Under the paystub formula, as backed by the undisputed guarantee, every single project manager in every single possible situation would receive exactly the same pay as under the more complicated formula that the plaintiffs say Saint Consulting should have used. The fact that the pay was usually--but not always--high enough to render the guaranteed stipend unnecessary hardly means that the guarantee was not part of the employee's compensation. 29 C.F.R. § 541.602(a). And since it was both predetermined and not subject to reduction because of variation's in the quality or quantity of the work performed, it plainly qualifies as a payment on a salary basis. Id.; see Anani v. CVS RX Servs., Inc., 730 F.3d 146, 148 (2d Cir. 2013) (pharmacist qualified for highly compensated employee exemption when he received a guaranteed $1,250 weekly salary and significant additional compensation based on number of hours worked); Hogan v. Allstate Ins. Co., 361 F.3d 621, 624 (11th Cir. 2004) (insurance agents were paid on salary basis when they received a monthly minimum compensation amount if their compensation from net written premiums was less than the guarantee). -10- Lastly, we need not reach the alternative argument to which the plaintiffs devoted a significant portion of their opening brief, contending that the separate [m]inimum guarantee plus extras regulation of 29 C.F.R. § 541.604 required Saint Consulting's stipend to be reasonably related to plaintiffs' actual pay of more than $3,000 per week. Saint Consulting does not rely on that exemption, and we see no reason why its requirements should be grafted onto the materially different exemption on which Saint Consulting relies. See Anani, 730 F.3d at 149 (We perceive no cogent reason why the requirements of C.F.R. § 541.604 must be met by an employee meeting the requirements of C.F.R. § 541.601.). The plaintiffs thus sensibly abandoned in their reply brief the argument that section 541.604(b) applies to highly compensated employees ([p]laintiffs do not take a position on this issue). In sum, because the undisputed evidence shows that Saint Consulting paid its project managers on a salary basis within the meaning of 29 C.F.R. § 541.602(a), and the parties agreed that they received more than $100,000 per year for continuously performing the duties of a professional employee, the project managers were exempt as highly compensated employees under 29 C.F.R. § 541.601. -11-