From Public Employer''s Guide to FLSA
Employee Classification, ©Thompson Publishing Group, Inc.
The 9th U.S. Circuit Court of Appeals
recently held that an exempt, salaried supervisor did not lose her exempt
status under the Fair Labor Standards Act (FLSA) even though she was
temporarily paid an hourly rate while she worked a reduced schedule to recover
from an injury.
Specifically, the court in Rowe v. Laidlaw Transit Inc. ruled that
the FLSA´s salary basis test (29 C.F.R. §541.118) was not violated when the
worker received the hourly rate, because her injury qualified her for Family
and Medical Leave Act (FMLA) leave.
At issue in the case was an obscure
exception to the FLSA salary test that allows employers, under certain
circumstances, to make partial-day deductions to the pay of salaried exempt
employees. The exception (29 C.F.R. §825.206) is unfamiliar to many employers
because it is established in the U.S. Department of Labor´s FMLA rules, not the
FLSA regulations.
In Rowe,
the employee did not dispute that her duties qualified her as a white-collar
employee exempt from the FLSA´s minimum wage and overtime provisions. Rather,
in pursuing her back wage claim, Rowe argued that she was not paid a salary,
another requirement generally associated with the FLSA´s white-collar
exemptions.
Rowe´s
Schedule Change
In 1997, Rowe suffered a serious ankle
injury. After exhausting all of her employer-provided sick leave and vacation
leave, Rowe asked her employer if she could work on a part-time basis. Rowe´s
doctor said she could work no more than five hours per day.
The employer agreed to Rowe´s request.
However, in exchange for her part-time schedule, Rowe agreed to be compensated
on an hourly basis. Later, when Rowe recovered from her injury, she returned to
her full-time duties and was again paid a salary.
In 1998, the employer cited problems with
Rowe´s work performance, leading Rowe to resign her position. She then filed an
FLSA overtime suit against the employer, arguing that she had never truly
qualified as an FLSA-exempt employee because she had received hourly pay during
her part-time work.
Before the 9th Circuit, the employer argued
that the hourly compensation provided to Rowe did not violate the salary test.
Citing the salary test exception established in the FMLA rules, the employer
argued that its actions did not destroy Rowe´s status as an exempt employee.
Rowe, on the other hand, asserted that the
salary test exception provided in the FMLA rules did not apply to her situation
because her employer did not explicitly designate her injury-related leave "as
FMLA leave prior to accepting her proposal for a reduced schedule."
The FMLA allows
qualifying employees to take up to 12 weeks of FMLA leave annually. Under FMLA
regulations, if the employer fails to designate the leave as FMLA-qualifying, the time off does not count
against the employee´s 12-week entitlement.
Rowe´s employer argued that it did not need
to provide prior designation of Rowe´s FMLA leave to avail itself of the
special salary basis exception. After weighing the two parties´ arguments, the
9th Circuit agreed.
"The district court correctly concluded
that prior notice by the employer is not a prerequisite for a partial leave to
be protected by the FMLA," the appeals court said, affirming an earlier ruling
in the case. "The fact that [the employer] did not formally designate the leave
as FMLA-qualifying does not alter" the fact that Rowe´s reduced schedule
qualified as FMLA leave.
"Indeed, a contrary holding would frustrate
the purposes of the FMLA to protect employees from adverse employment decisions
based on the employee´s serious health condition involving continuing
treatment," the court continued. "It would also unfairly punish employers for
accommodating the employee´s work restrictions while the employee recovered."
In sum, Rowe´s unpaid leave, granted in the
form of a reduced work schedule, qualified as FMLA leave. Therefore, the leave
and the hourly pay arrangement that accompanied it did not affect Rowe´s
FLSA-exempt, salaried status by virtue of 29 C.F.R. §825.206. (Rowe v. Laidlaw Transit Inc., 9th Cir.,
No. 00-35197, April 4, 2001)
Editor´s Note: Public-sector employers should note that the salary basis exception discussed in Rowe is separate and distinct from the partial-day docking rule established for state and local governments in 29 C.F.R. §541.5d. Whereas both public- and private-sector employers may avail themselves of the FMLA provision (29 C.F.R. §825.206), only public-sector employers may use 29 C.F.R. §541.5d.