Court of Appeal - Hourly Pay X Busy Employee = Non-Exempt Compensation

The plaintiff was an insurance adjuster.  He was paid $29 / hour for every hour worked, including overtime.  He always worked more than 40 hours per week.  In a wage-hour lawsuit, he claimed he was not properly classified as exempt because he was not paid on a salary basis.  (He challenged the duties test as well it appears).  The employer argued that he was never paid less than 40 X $29 because he always worked overtime. Therefore, he earned the equivalent of a salary.  The trial court bought that argument.

But the Court of Appeal reversed.

The question presented in this case is whether a compensation scheme based solely upon the number of hours worked, with no guaranteed minimum, can be considered a “salary” within the meaning of the pertinent wage and hour laws. We conclude that such a payment schedule is not a salary and, therefore, does not qualify the employee as exempt.

The employer argued "no harm, no foul," in that the employee always received more than 40 hours x $29 per hour, in that he was always working more than 40 hours.  But, said the court,

The problem here is that defendant stipulated to the fact that it “never paid [plaintiff] a guaranteed salary”; if he worked fewer claims “he made less money than if he worked more claims.” That is the same thing as saying that plaintiff was not paid “a predetermined amount” that “was not subject to reduction based upon the quantity of work performed.” He was not paid a salary. For that reason, defendant did not prove that the administrative exemption of Wage Order 4 applies in this case.

The court did not address whether the employee was properly classified as exempt based on his duties, because the salary issue destroyed his claim.

So, a salary is a predetermined sum, that is not reduced because of the quantity or quality of work performed.  To qualify for exempt status, the fixed salary must be at least 2 X minimum wage (currently $8.00 in California) X 40 hours.  Certain deductions from salary are authorized, as detailed in the federal FLSA regulations, 29 CFR 541.602 (here).

This case is Negri v. Koning & Associates and the opinion is here.