What do you do if you if you want to cash in on the recent flood of wage and hour class and collective actions, but the employer’s policies are actually lawful? Based on the court’s opinion in Kulish v. Rite Aid Corp., Civil Action No. ELH-11-3178 (D. Md. Dec. 13, 2012), filing suit anyway may not be the best approach.
In Kulish, the plaintiffs were pharmacists who sought to assert a collective action against the Rite Aid and Eckerd drug stores for failure to pay overtime under federal and Maryland law. There appears to have been little debate whether pharmacists could properly be classified as exempt professional employees. The plaintiffs relied instead primarily on alleged violations of the “salaried employee” test. They argued that Rite Aid required that pharmacists who had exhausted their paid sick leave and vacation time take unpaid leave in full-day increments, rather than for whatever portion of the day they might need, and asserted that this policy destroyed the “salary” basis.
Close followers of the FLSA would quickly point out that the company’s policy was exactly what the law required. The U.S. Department of Labor regulations, of course, require that an employee to be “salaried” to qualify for the administrative, executive, or professional exemptions. 29 C.F.R. § 541.601. The regulations point out that a salary means that the employee receives the same amount in each pay period that “is not subject to reduction because of variations in the quality or quantity of work performed.” 29 C.F.R. § 541.602(a). In the past, some employers have run afoul of the salary requirement through improper payroll deductions for things such as tardiness, short-term layoffs, or minor discipline.
The regulations, however, provide a list of exceptions that include deductions when an exempt employee is absent from work for a full day or more for personal reasons (or when, essentially, they have exhausted their available sick leave). 29 C.F.R. § 541.602(b)(1). In that case, the employer can deduct the full day.
The employer in Kulish did provided paid leave, and also permitted pharmacists to take unpaid leave so long as they did so in full-day increments. The Kulish plaintiffs argued that there were many instances in which a pharmacist who had no paid leave available only needed part of a day and was left with the choice either of taking the entire day off or, as the employer noted, trading shifts with another pharmacist. Given the clear directive of the regulation, however, and the common sense notion that a different policy would discourage employers from granting any leave at all, the court granted summary judgment in favor of the employer.
The bottom line: Plaintiffs cannot predicate FLSA collective actions upon lawful wage and hour policies.