Opinion ID: 1468675
Heading Depth: 3
Heading Rank: 5

Heading: The post-August 23, 2004 period

Text: Here, Plaintiffs argue, again, that the district court erred in finding that § 541.603 and its actual deduction requirement supplanted the Auer test. Having dealt with this issue previously, and because the DOL has ample authority to issue new regulations after the requisite notice-and-comment period, we conclude that Plaintiffs' argument fails. On the other hand, Life Time Fitness, on cross-appeal, argues that the district court erred in finding that the deductions from Plaintiffs' salaries made in late 2005 were impermissible. Life Time Fitness contends that the district court: (1) failed to follow proper legal standards in analyzing whether deductions made under the plan were because of variations in the quality or quantity of work, and (2) failed to give weight to material facts showing that deductions were not made because of quality or quantity of work.
Life Time Fitness concedes that it took deductions from guaranteed pay in November and December of 2005, but it argues that it did so in order to recoup overpayment, not because of the quality or quantity of Plaintiffs' work. Life Time Fitness claims that it is well established that an employer is permitted to reduce wages or salary to recoup for earlier overpayments, and it cites to DOL opinion letters allowing the recovery of overpayment. One letter, in relevant part, provides: Q.1. What percentage of the employee's paycheck may [the employer] deduct to recoup the money owed it? A.1. It has been our longstanding position that where an employer makes a loan or an advance of wages to an employee, the principal may be deducted from the employee's earnings even if such deduction cuts into the minimum wage or overtime pay due the employee under the FLSA. Thus, the percentage that [the employer] may deduct to recoup the money owed to it would be at its own discretion or per agreement with employee. Department of Labor, Wage and Hour Division Opinion Letter of Mar. 20, 1998, 1998 WL 852662; see also Department of Labor, Wage and Hour Division Opinion Letter of Oct. 8, 2004, 2004 WL 3177896 (same). Thus, Life Time Fitness argues that there was nothing improper about paycheck deductions that simply recovered the overpaid bonus amount. We disagree. Life Time Fitness did not provide loans to its employees. To be sure, it did make advance bonus payments. However, to recover overpayments, Life Time Fitness impermissibly dipped into Plaintiffs' guaranteed salaries. Unlike the situation in both DOL letters, Life Time Fitness knowingly made salary deductions as part of a pre-designed bonus compensation plan. See Baden-Winterwood, 2007 U.S. Dist. LEXIS 49777, at -39, 2007 WL 2029066, at -15. The deductions were not made to recover irregular salary advances or payments mistakenly made by the payroll department. See id. The plain language of 29 C.F.R. § 541.602 provides, [s]ubject to the exceptions provided in [section 541.602(b) ], an exempt employee must receive the full salary for any week in which the employee performs any work. ... 29 C.F.R. § 541.602(a). Section 541.602(b) provides, generally, that deductions may be made for absentee-ism, sick leave (in certain circumstances), penalties imposed in good faith for infractions of safety rules, unpaid disciplinary suspensions, and, under the DOL letters described above, for mistaken overpayments. But, there is no support for the contention that the FLSA allows for the reduction of guaranteed pay under a purposeful, incentive-driven bonus compensation plan. We conclude therefore that the district court properly determined that Life Time Fitness took improper deductions under § 541.603. The district court correctly explained that the DOL materials cited by [Life Time Fitness], while supportive of the recovery of advances and overpayments in certain situations, do not sanction the recovery of overpayments in this case. Baden-Winterwood, 2007 U.S. Dist. LEXIS 49777, at , 2007 WL 2029066, at .
In the alternative, Life Time Fitness argues that the district court ignored material facts showing that the compensation plans at issue in this lawsuit were computed based on departmental performance rather than on any variance in the quality or quantity of an individual's work. Life Time Fitness alleges that the evidence in the record demonstrates that monthly-paid bonus advances were dependent upon a number of factors and were not tethered solely or directly to the hours any covered employee worked or the quality of her work. (Final Second Br. of Life Time Fitness at 57.) By way of example, Life Time Fitness contends that a Department-Head-level employee's bonus was affected by her supervisees' performance, the size and location of a particular club, club-usage volume, and other factors. We find Life Time Fitness's argument that its corporate bonus compensation plans are not based on individual performance to be dubious, at best. As stated by the district court, it is strange for Defendant to argue that individual performance was mainly irrelevant to the computation of bonus payments. [Life Time Fitness] offered, after all, that it created the bonus plans `[a]s a means for providing incentives for certain of its employees. ...' Baden-Winterwood, 2007 U.S. Dist. LEXIS 49777, at , 2007 WL 2029066, at . In fact, Plaintiffs set forth an extensive recordincluding stipulated facts and testimonyto show that Life Time Fitness's corporate bonus compensation plans were tied to individual performance and varied based on the quality and quantity of each individual's work. Id. at -42, 2007 WL 2029066, at -15.