FAIR LABOR STANDARDS ACT-PTO (PRODUCTIVITY POINTS)-SALARY

Higgins v. Bayada Home Health Care Inc., 62 F.4th 755 (3d Cir. March 15, 2023) (Jordan, C.J.). Stephanie Higgins and her co-plaintiffs, the appellants before us now, filed a collective action and putative class action alleging that their employer, Bayada Home Care, Inc., made improper deductions from their accumulated paid time off (which, with apologies for the several acronyms we are about to use, we join the parties in calling “PTO”). The plaintiffs argue that the deductions were effectively reductions in their salary and thus made in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., and state employment laws, including, as relevant to Higgins, the Pennsylvania Minimum Wage Act (“PMWA”), 43 P.S. § 333.101, et seq. Their primary contention is that PTO qualifies as salary under the FLSA and its related regulations, and that, by deducting from their PTO, Bayada made deductions from their salary, which is something the FLSA and regulations forbid. The District Court saw a meaningful distinction between PTO and salary and so granted partial summary judgment for Bayada. The Court then certified its decision for immediate appeal. Whether PTO is part of an employee’s salary for the purposes of the FLSA is an issue of first impression for us. We hold, based on the plain meaning of the regulatory language promulgated under the FLSA, that PTO is not part of an employee’s salary. In short, we will affirm. The FLSA generally requires an employer to pay its employees a minimum of one and a half times their rate of pay for all hours worked in excess of forty hours during a week. 29 U.S.C. § 207(a)(1). There is, however, an exception to the FLSA’s overtime pay requirement. It does not apply to those employees “employed in a bona fide executive, administrative, or professional capacity[.]” 29 U.S.C. § 213(a)(1). Under § 213(a)(1) of the statute (as codified), the Secretary of Labor has the authority to define the term “professional,” and the Secretary has issued regulations to that end. For an employee to be considered a “professional,” an employer must, among other things, show that the employee is paid on a “salary basis.” 29 C.F.R. § 541.600 (2021). As there is no question that Bayada made deductions from the plaintiffs’ PTO, the question here is whether PTO constitutes part of an employee’s salary under the FLSA and its related regulations. If PTO is part of an employee’s salary, then Bayada’s practice of deducting PTO from its employees’ leave banks when they do not meet their weekly productivity points minimums is a practice of making actual and improper deductions under the FLSA. And that would cause Bayada to forfeit the overtime-pay exemption that currently applies to its Clinicians. Because we now hold that PTO is not a part of an employee’s salary under the Department of Labor’s salary basis regulations, we will affirm the District Court’s decision that Bayada did not make improper deductions from the plaintiffs’ salaries.