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U.S. Third Circuit Court Says Paid Time Off is NOT Part of an Employee's Salary Under the Fair Labor Standards Act

An employer did not run afoul of the Fair Labor Standards Act (“FLSA”) when it deducted paid time off (“PTO”) from employees who failed to meet productivity goals, the United States Court of Appeals for the Third Circuit ruled in a unanimous decision in Higgins v. Bayada Home Health Care, Inc., No. 21-3286 (3d Cir., March 15, 2023).

Plaintiffs were registered nurses who formerly worked for Bayada, a company providing medical and related support services for patients in their homes. Plaintiffs were full-time salaried employees and were required to meet weekly “productivity minimums.” To meet their productivity minimum, employees must accumulate a specified number of “productivity points” a week – each point being roughly equivalent to 1.33 hours of work. The productivity points were awarded in exchange for completing work tasks. When employees exceeded their productivity minimums, they received additional compensation. On the other hand, if employees failed to meet their weekly productivity minimums, Bayada would withdraw from the employees’ available PTO to supplement the difference between the points they were expected to earn and what they actually earned. Bayada did not deduct from an employee’s guaranteed base salary when the employee lacked sufficient PTO to cover a productivity point deficit.

The employees sued, alleging that PTO was part of their salary and the deductions were in violation of the FLSA. The United States District Court for the Middle District of Pennsylvania disagreed with the employees and dismissed their claim on summary judgment.

On appeal, the Third Circuit court held that an employer does not violate the FLSA by deducting from an employee’s PTO because, when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of the pay period does not change. Than an employee might at some point be able to convert her PTO into case does not alter that fact. The Court held that PTO, for the purposes of the FLSA, is a fringe benefit and as no effect on the employee’s salary or wages.

This case marks the first time that a U.S. appeals court was asked whether paid time off counts as part of an employee's salary. The FLSA prohibits employers from reducing the pay of an exempt employee paid on a salary basis, except for a few narrow exceptions. Employers that do make improper deductions may risk an employee’s exempt status, entitling the employee to overtime pay.

U.S. Third Circuit Court Says Paid Time Off is NOT Part of an Employee's Salary Under the Fair Labor Standards Act

An employer did not run afoul of the Fair Labor Standards Act (“FLSA”) when it deducted paid time off (“PTO”) from employees who failed to meet productivity goals, the United States Court of Appeals for the Third Circuit ruled in a unanimous decision in Higgins v. Bayada Home Health Care, Inc., No. 21-3286 (3d Cir., March 15, 2023).

Plaintiffs were registered nurses who formerly worked for Bayada, a company providing medical and related support services for patients in their homes. Plaintiffs were full-time salaried employees and were required to meet weekly “productivity minimums.” To meet their productivity minimum, employees must accumulate a specified number of “productivity points” a week – each point being roughly equivalent to 1.33 hours of work. The productivity points were awarded in exchange for completing work tasks. When employees exceeded their productivity minimums, they received additional compensation. On the other hand, if employees failed to meet their weekly productivity minimums, Bayada would withdraw from the employees’ available PTO to supplement the difference between the points they were expected to earn and what they actually earned. Bayada did not deduct from an employee’s guaranteed base salary when the employee lacked sufficient PTO to cover a productivity point deficit.

The employees sued, alleging that PTO was part of their salary and the deductions were in violation of the FLSA. The United States District Court for the Middle District of Pennsylvania disagreed with the employees and dismissed their claim on summary judgment.

On appeal, the Third Circuit court held that an employer does not violate the FLSA by deducting from an employee’s PTO because, when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of the pay period does not change. Than an employee might at some point be able to convert her PTO into case does not alter that fact. The Court held that PTO, for the purposes of the FLSA, is a fringe benefit and as no effect on the employee’s salary or wages.

This case marks the first time that a U.S. appeals court was asked whether paid time off counts as part of an employee's salary. The FLSA prohibits employers from reducing the pay of an exempt employee paid on a salary basis, except for a few narrow exceptions. Employers that do make improper deductions may risk an employee’s exempt status, entitling the employee to overtime pay.

U.S. Third Circuit Court Says Paid Time Off is NOT Part of an Employee's Salary Under the Fair Labor Standards Act

An employer did not run afoul of the Fair Labor Standards Act (“FLSA”) when it deducted paid time off (“PTO”) from employees who failed to meet productivity goals, the United States Court of Appeals for the Third Circuit ruled in a unanimous decision in Higgins v. Bayada Home Health Care, Inc., No. 21-3286 (3d Cir., March 15, 2023).

Plaintiffs were registered nurses who formerly worked for Bayada, a company providing medical and related support services for patients in their homes. Plaintiffs were full-time salaried employees and were required to meet weekly “productivity minimums.” To meet their productivity minimum, employees must accumulate a specified number of “productivity points” a week – each point being roughly equivalent to 1.33 hours of work. The productivity points were awarded in exchange for completing work tasks. When employees exceeded their productivity minimums, they received additional compensation. On the other hand, if employees failed to meet their weekly productivity minimums, Bayada would withdraw from the employees’ available PTO to supplement the difference between the points they were expected to earn and what they actually earned. Bayada did not deduct from an employee’s guaranteed base salary when the employee lacked sufficient PTO to cover a productivity point deficit.

The employees sued, alleging that PTO was part of their salary and the deductions were in violation of the FLSA. The United States District Court for the Middle District of Pennsylvania disagreed with the employees and dismissed their claim on summary judgment.

On appeal, the Third Circuit court held that an employer does not violate the FLSA by deducting from an employee’s PTO because, when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of the pay period does not change. Than an employee might at some point be able to convert her PTO into case does not alter that fact. The Court held that PTO, for the purposes of the FLSA, is a fringe benefit and as no effect on the employee’s salary or wages.

This case marks the first time that a U.S. appeals court was asked whether paid time off counts as part of an employee's salary. The FLSA prohibits employers from reducing the pay of an exempt employee paid on a salary basis, except for a few narrow exceptions. Employers that do make improper deductions may risk an employee’s exempt status, entitling the employee to overtime pay.

U.S. Third Circuit Court Says Paid Time Off is NOT Part of an Employee's Salary Under the Fair Labor Standards Act

An employer did not run afoul of the Fair Labor Standards Act (“FLSA”) when it deducted paid time off (“PTO”) from employees who failed to meet productivity goals, the United States Court of Appeals for the Third Circuit ruled in a unanimous decision in Higgins v. Bayada Home Health Care, Inc., No. 21-3286 (3d Cir., March 15, 2023).

Plaintiffs were registered nurses who formerly worked for Bayada, a company providing medical and related support services for patients in their homes. Plaintiffs were full-time salaried employees and were required to meet weekly “productivity minimums.” To meet their productivity minimum, employees must accumulate a specified number of “productivity points” a week – each point being roughly equivalent to 1.33 hours of work. The productivity points were awarded in exchange for completing work tasks. When employees exceeded their productivity minimums, they received additional compensation. On the other hand, if employees failed to meet their weekly productivity minimums, Bayada would withdraw from the employees’ available PTO to supplement the difference between the points they were expected to earn and what they actually earned. Bayada did not deduct from an employee’s guaranteed base salary when the employee lacked sufficient PTO to cover a productivity point deficit.

The employees sued, alleging that PTO was part of their salary and the deductions were in violation of the FLSA. The United States District Court for the Middle District of Pennsylvania disagreed with the employees and dismissed their claim on summary judgment.

On appeal, the Third Circuit court held that an employer does not violate the FLSA by deducting from an employee’s PTO because, when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of the pay period does not change. Than an employee might at some point be able to convert her PTO into case does not alter that fact. The Court held that PTO, for the purposes of the FLSA, is a fringe benefit and as no effect on the employee’s salary or wages.

This case marks the first time that a U.S. appeals court was asked whether paid time off counts as part of an employee's salary. The FLSA prohibits employers from reducing the pay of an exempt employee paid on a salary basis, except for a few narrow exceptions. Employers that do make improper deductions may risk an employee’s exempt status, entitling the employee to overtime pay.

U.S. Third Circuit Court Says Paid Time Off is NOT Part of an Employee's Salary Under the Fair Labor Standards Act

An employer did not run afoul of the Fair Labor Standards Act (“FLSA”) when it deducted paid time off (“PTO”) from employees who failed to meet productivity goals, the United States Court of Appeals for the Third Circuit ruled in a unanimous decision in Higgins v. Bayada Home Health Care, Inc., No. 21-3286 (3d Cir., March 15, 2023).

Plaintiffs were registered nurses who formerly worked for Bayada, a company providing medical and related support services for patients in their homes. Plaintiffs were full-time salaried employees and were required to meet weekly “productivity minimums.” To meet their productivity minimum, employees must accumulate a specified number of “productivity points” a week – each point being roughly equivalent to 1.33 hours of work. The productivity points were awarded in exchange for completing work tasks. When employees exceeded their productivity minimums, they received additional compensation. On the other hand, if employees failed to meet their weekly productivity minimums, Bayada would withdraw from the employees’ available PTO to supplement the difference between the points they were expected to earn and what they actually earned. Bayada did not deduct from an employee’s guaranteed base salary when the employee lacked sufficient PTO to cover a productivity point deficit.

The employees sued, alleging that PTO was part of their salary and the deductions were in violation of the FLSA. The United States District Court for the Middle District of Pennsylvania disagreed with the employees and dismissed their claim on summary judgment.

On appeal, the Third Circuit court held that an employer does not violate the FLSA by deducting from an employee’s PTO because, when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of the pay period does not change. Than an employee might at some point be able to convert her PTO into case does not alter that fact. The Court held that PTO, for the purposes of the FLSA, is a fringe benefit and as no effect on the employee’s salary or wages.

This case marks the first time that a U.S. appeals court was asked whether paid time off counts as part of an employee's salary. The FLSA prohibits employers from reducing the pay of an exempt employee paid on a salary basis, except for a few narrow exceptions. Employers that do make improper deductions may risk an employee’s exempt status, entitling the employee to overtime pay.

U.S. Third Circuit Court Says Paid Time Off is NOT Part of an Employee's Salary Under the Fair Labor Standards Act

An employer did not run afoul of the Fair Labor Standards Act (“FLSA”) when it deducted paid time off (“PTO”) from employees who failed to meet productivity goals, the United States Court of Appeals for the Third Circuit ruled in a unanimous decision in Higgins v. Bayada Home Health Care, Inc., No. 21-3286 (3d Cir., March 15, 2023).

Plaintiffs were registered nurses who formerly worked for Bayada, a company providing medical and related support services for patients in their homes. Plaintiffs were full-time salaried employees and were required to meet weekly “productivity minimums.” To meet their productivity minimum, employees must accumulate a specified number of “productivity points” a week – each point being roughly equivalent to 1.33 hours of work. The productivity points were awarded in exchange for completing work tasks. When employees exceeded their productivity minimums, they received additional compensation. On the other hand, if employees failed to meet their weekly productivity minimums, Bayada would withdraw from the employees’ available PTO to supplement the difference between the points they were expected to earn and what they actually earned. Bayada did not deduct from an employee’s guaranteed base salary when the employee lacked sufficient PTO to cover a productivity point deficit.

The employees sued, alleging that PTO was part of their salary and the deductions were in violation of the FLSA. The United States District Court for the Middle District of Pennsylvania disagreed with the employees and dismissed their claim on summary judgment.

On appeal, the Third Circuit court held that an employer does not violate the FLSA by deducting from an employee’s PTO because, when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of the pay period does not change. Than an employee might at some point be able to convert her PTO into case does not alter that fact. The Court held that PTO, for the purposes of the FLSA, is a fringe benefit and as no effect on the employee’s salary or wages.

This case marks the first time that a U.S. appeals court was asked whether paid time off counts as part of an employee's salary. The FLSA prohibits employers from reducing the pay of an exempt employee paid on a salary basis, except for a few narrow exceptions. Employers that do make improper deductions may risk an employee’s exempt status, entitling the employee to overtime pay.