You can’t have it both ways – that was the opinion of a federal district court judge who recently awarded summary judgment to the more than 400 former and current department heads and co-managers who filed suit against New York supermarket chain Gristedes for unpaid overtime (Torres et al. v. Gristedes Operating Corp, 2008 WL 4054417). As noted by the New York Times, most partial day deductions from pay invalidate an argument that employees are paid on a salary basis. This was Gristedes downfall.
Under the FLSA (as well as New York State law), only salaried white collar positions may be “exempt,” and thus ineligible for overtime pay under most of the specific exemptions defined by these laws. The FLSA requires that salaried exempt employees be paid “the full salary for any week in which the employee performs any work without regard to the number of days and hours worked” [29 C.F.R. § 541.602(a)], with limited exceptions. While Gristedes considered its department heads and co-managers “exempt” and failed to compensate them at time and one-half for hours worked in excess of 40 in a workweek, it also made improper deductions from their “salaries” in at least 7.5% of pay periods over 10 years, according to the testimony of Gristedes own expert witness. When the court granted summary judgment to plaintiffs on this count, all of Gristedes other justifications for classifying these employees as exempt became irrelevant.
To maintain “salary basis” for exempt employees, employers must:
- Remember that salary cannot be reduced for variations in the quality or quantity of work
- Make deductions from pay only for the following reasons:
- absence from work for one or more full days due to sickness or disability in accordance with a Company plan or policy
- absence from work for one or more full days for personal reasons other than sickness or disability, beyond any such absences that are permitted under the Company policy
- to off-set amounts employees receive as jury or witness fees or military differential pay
- for unpaid disciplinary suspensions of one (1) or more full days, imposed in good faith for workplace conduct rule infractions
- for a penalty imposed in good faith for infractions of safety rules of major significance
- for days not worked in the first and last weeks of employment
- Publish and distribute a policy (perhaps within an employee handbook) explaining the bases on which deductions from salary will be made, and providing employees with a complaint mechanism for resolving payroll error.
Gristedes argued in this case that its approach to paying the plaintiffs was consistent with “industry practice.” If so, we can expect to see a lot more overtime claims against grocers in the near future.