Bell v. Callaway Partners, LLC

Plaintiffs were  bookkeepers/accountants classified by Defendant as exempt from the Fair Labor Standards Act’s (FLSA) overtime pay requirement.  This appeal concerned solely the issue of whether Plaintiff- who was paid a combination of a guaranteed weekly salary plus a variable bonus (at a straight-time rate rather than time and a half)- was paid on a “salary basis” for the purposes of satisfying the so-called “white collar” exemptions of the FLSA.  The Court ruled that she was and affirmed the ruling of the lower court, holding that variations in bonus or extra pay do not affect the underlying analysis of whether the first 40 hours are paid at on a “salary basis.”

Describing the pay structure at issue, the Court stated:

“Plaintiffs’ pay consisted of two distinct components. First, Plaintiffs received a guaranteed weekly salary of $1600 or more that did not depend on the quality or quantity of the work performed. This weekly salary was reduced by one-fifth of the weekly salary for every full day a Plaintiff took off from work for personal reasons during the normal workweek without substituting Paid Time Off (“PTO”). But, a Plaintiff could work fewer than eight hours during any given workday without any reduction in his or her weekly salary. Second, Plaintiffs were eligible to receive additional incentive compensation (a “bonus”) paid at a straight-time hourly rate based on the cumulative number of billable hours that Plaintiffs worked. Any bonus to be awarded was determined based on how many additional hours over forty a Plaintiff worked in a given week minus any “deficit” hours a Plaintiff had accumulated in past weeks. For example, if a Plaintiff worked seven and not eight hours on each regularly-scheduled workday in a given week, thus totaling 35 hours of work, he or she still earned the full predetermined weekly salary, but would not earn a bonus in a subsequent week until he or she made up the bonus-hour deficit of five hours and then worked more than 40 hours in a given week.”

Holding that this compensation methodology complied with the “salary basis” test, the Court reasoned:

“An employee is considered “paid on a salary basis” if “he regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of his compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C .F.R. § 541.602. Plaintiffs argue that they were not paid on a salary basis because the amount of their bonuses fluctuated based on the cumulative number of hours worked. But, as we have previously determined, “as long as there is a non-deductible minimum, additional compensation on top of the non-deductible salary is permissible.” Hogan v. Allstate Ins. Co., 361 F.3d 621, 625 (11th Cir.2004) (citation omitted). And, while additional compensation is permissible, the regulations do not require additional compensation, nor do they prescribe a set method for setting up a bonus system. 29 C.F.R. § 541.604(a) (“An employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount paid on a salary basis…. Such additional compensation may be paid on any basis ….”).

After a review of the record, we agree with the district court’s well-reasoned analysis concluding that Callaway’s bonus system conformed to the requirements of the salary basis test. (R.374 at 13-24.) While Callaway’s incentive program may have been designed in a way that encouraged overtime work, as Plaintiffs argue it was, because it deducted for “deficit” hours, it nevertheless conformed to the requirements of the FLSA. Because there was a non-deductible minimum weekly salary, Callaway was free to structure any bonus program as it saw fit.

Plaintiffs also argue that Callaway violated the salary basis test when it deducted a full day’s pay for personal days missed during the workweek (Monday through Friday) but did not pay Plaintiffs for a “full day” for partial days worked on Saturday or Sunday. Again, we agree with the district court’s analysis concluding that such deductions were allowable under the provisions of 29 C.F.R. § 541.602(b)(1). (R.374 at 25-34.) Therefore, we hold that the district court did not err in finding Callaway’s pay policies to be in compliance with the FLSA.”