Paid time off (PTO) is not considered part of an employee's salary, so it can be docked without jeopardizing the employee's exempt status, the 3rd U.S. Circuit Court of Appeals recently ruled. In a March 15 opinion, the court held that PTO is a fringe benefit with monetary value, not a component of salary under federal law.
"Even though the employer prevailed in this case, one key lesson is that employers must carefully analyze any plan that would result in taking money away from exempt employees to ensure that the exemption is not lost," said Steven Suflas, an attorney with Holland & Hart in Salt Lake City.
Background
A group of registered nurses, physical therapists and occupational therapists in Pennsylvania filed a class-action lawsuit in 2016, alleging that Bayada Home Care misclassified them as exempt from overtime pay and made improper deductions from their accumulated PTO. Bayada is a home health care and hospice provider based in Moorestown, N.J. It has approximately 29,000 employees and operates in 24 states.
The employees' lawsuit argued that PTO counts as part of a person's salary under the Fair Labor Standards Act (FLSA), which prohibits employers from taking salary reductions from exempt workers, except under limited circumstances. If the employer makes improper salary deductions, the employee loses exempt status and becomes eligible for overtime pay.
Bayada paid its employees a salary and required them to meet productivity quotas by accumulating a...
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