5th Cir.: Salaried pay does not itself establish overtime exemption

Dive Brief:

A district court's ruling that six sheriff's office detectives were paid on a salary basis was proper, according to the 5th U.S. Circuit Court of Appeals, and there was no evidence that their pay was subject to illegal deductions (Escribano v. Travis County, Texas, No. 19-50236 (5th Cir. Jan. 10, 2020)).
Travis County never docked the detectives' pay or otherwise reduced it, said the 5th Circuit. Additionally, even if there had been a policy authorizing such deductions, that alone would not be sufficient to cause them to lose their exempt status if the policy was never actually used to make deductions.
The fact that the detectives were paid a salary did not fully resolve the issue of whether the detectives were entitled to overtime pay. A second trial could have answered that question, said the 5th Circuit, but the detectives made a procedural mistake in declining to seek one. Accordingly, judgment in favor of the county was affirmed.

Dive Insight:

This case was complicated and unique in many ways, but it highlights an important point: Paying an employee on a salary basis is not enough, by itself, to establish that that employee is exempt from the overtime requirements of the federal Fair Labor Standards Act (FLSA).

To be considered exempt, an employee must:

Perform duties meeting one of the following tests: executive, administrative, professional, or outside sales; certain computer employees are also exempt.
Be paid on a salary basis (in some cases, payment on a fee basis is also acceptable).
Earn at least $684 per week.
Not be subject to improper deductions, which can remove the employee's exempt status.

Deductions from an exempt employee's pay are permitted in limited circumstances, such as:

When an exempt employee misses work for one or more full days for personal reasons other than sickness or disability — or for sickness or disability if the deduction is made in accordance with a plan, policy, or practice of compensating for salary lost due to illness.
To offset amounts employees receive as jury or witness fees, or for military pay.
For penalties when major safety rules are broken.
For unpaid disciplinary suspensions.
For the first and last weeks of employment.
For weeks the employee takes unpaid leave under the federal Family and Medical Leave Act.

While improper deductions from the pay of exempt employees are problematic, misclassification is a more common issue — when a non-exempt employee is treated as exempt, or when an employee is treated as an independent contractor. Compensation audits can help unearth these problems, so they can be corrected before a costly lawsuit arises. Experts recommend conducting these audits in such a way that privilege is maintained in the event of litigation.