On March 15, a three-judge panel of the third U.S. Circuit Court docket of Appeals dominated that Paid Time Off (PTO) just isn’t a part of an exempt worker’s wage as specified by the Honest Labor Requirements Act (FLSA).
For employers, this implies that you could deduct PTO from exempt workers if stated workers don’t meet sure targets or productiveness targets. In a first-of-its-kind case, the panel dominated {that a} wage is a hard and fast quantity of compensation paid to workers at common intervals, and PTO is a fringe profit that doesn’t have an effect on an worker’s wages. This implies it may be paid irregularly.
Background
The query of PTO being a part of an worker’s wage was raised by way of a lawsuit filed by healthcare employees towards their employer, Bayada Dwelling Care.
Labeled as exempt workers, underneath FLSA, the plaintiffs had been exempt from minimal wage and additional time necessities and had been assured a weekly wage. As such, deductions can’t be constructed from this wage besides in a number of particular situations and can’t be completed primarily based on the standard or amount of labor the worker performs. If deductions are made improperly, exemption standing is misplaced, and the employer should pay additional time pay for any additional time workers.
In Higgins v. Bayada Dwelling Well being Care, the defendant, Bayada Dwelling Well being Care, paid workers a assured wage and required workers to satisfy productiveness targets primarily based on hours that had been spent in-home visits or workers conferences. If workers exceeded their productiveness aim, they got further compensation. Nevertheless, if an worker fell in need of their aim, an equal quantity was deducted from the PTO that they had accrued. It’s necessary to notice that it was by no means deducted from an worker’s assured base wage.
A bunch of workers filed a lawsuit towards Bayada Dwelling Well being Care, alleging that they violated the FLSA’s salary-based necessities with their productiveness factors system. They argued that when the corporate deducted from the PTO of workers not hitting their targets, they had been being paid primarily based on how a lot they labored, a violation for exempt workers. In that case, they had been owed additional time pay as their exempt standing was null.
The Court docket of Appeals upheld the earlier resolution within the case, stating of their resolution, “[a]n employer doesn’t violate these circumstances by deducting from an worker’s PTO as a result of, when an employer docks an worker’s PTO, however not her base pay, the predetermined quantity that the worker receives on the finish of a pay interval doesn’t change.”
What Does This Imply for Employers?
This is a vital resolution in favor of employers. Doubtless, Bayada Dwelling Well being Care just isn’t the one employer making deductions primarily based on productiveness. This resolution supplies peace of thoughts for different employers with related insurance policies that this can be a authorized apply.
It additionally supplies corporations trying to make related insurance policies argument for implementing one. Nevertheless, it’s necessary to look laborious at such a coverage and determine if it’s one of the best factor for the corporate, though it’s authorized. Most exempt workers view their accruing PTO as a part of their wage and never only a fringe profit. These sorts of deductions might have an effect on your worker morale, particularly if the deductions are a brand new coverage.
If nothing else, this case making headlines offers corporations a superb alternative to refresh themselves on FLSA and the number of deductions that may and can’t be constructed from an exempt worker’s wages. It’s additionally time for corporations to assessment what state legal guidelines govern PTO, as these can differ from state to state and exceed the protections of the FLSA.
Whereas the employers had been the winners on this lawsuit, it’s all the time finest to seek the advice of with authorized counsel earlier than deciding whether or not or to not make any deductions from exempt workers’ wages or advantages.
Try the Full Payroll weblog as we speak for up-to-date data on all authorized selections affecting what you are promoting.
