On March 15, 2023, the U.S. Court of Appeals for the Third Circuit held that paid time off (PTO) is not part of an employee's salary for purposes of the Fair Labor Standards Act (FLSA). In Higgins v. Bayada Home Health Care Inc., the Third Circuit upheld the partial grant of summary judgment by the U.S. District Court for the Middle District of Pennsylvania in favor of the employer, Bayada Home Health Care (Bayada), finding that Bayada's deductions from FLSA-exempt employees' accumulated PTO was not an improper deduction from their salary under the FLSA.
Under the FLSA, employees are classified as either exempt or non-exempt from the FLSA minimum wage and overtime requirements. To qualify as exempt, an employee generally must meet certain tests regarding their job duties and be paid on a salary basis (currently at not less than $684 per week under federal law). The "salary basis" part of this test means that an employee is guaranteed a base salary, paid at a predetermined amount each pay period, regardless of the number of days or hours worked. Employers may make deductions from an exempt employee's predetermined amount of compensation only in very limited circumstances. Variations in the quality or quantity of the employee's work are not a basis for deducting from exempt employees' pay.
Court Decision: Higgins v. Bayada Home Health Care Inc.
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