In an issue of first impression, the U.S. Court of Appeals for the Third Circuit held that paid time off (“PTO”) is not a form of salary under the Fair Labor Standards Act (“FLSA”) and, therefore, deductions from a salaried employee’s PTO balance do not violate the Act. Higgins v. Bayada Home Health Care Inc., 2023 U.S. App. LEXIS 6124 (3d Cir. Mar. 15, 2023).

The Third Circuit has jurisdiction over the federal courts in Pennsylvania, New Jersey, and Delaware.


Plaintiff Stephanie Higgins is a registered nurse who worked for defendant Bayada Home Health Care from 2012 to 2016 as a full-time, salaried employee. Higgins and all other full-time salaried healthcare employees at Bayada were required to meet weekly “productivity minimums.” These minimums are expressed in points, with each point equating to work tasks like patient visits (and thus to hours worked). When a healthcare worker (referred to by the company as Clinicians) exceeds their productivity minimum, they are paid more. Conversely, when a Clinician falls short of the weekly minimum, Bayada reduces their PTO balance based on expected-versus-actual points earned.

An employee may request an increase or decrease in their weekly productivity minimums, with a corresponding increase or decrease in salary, but the company does not deduct from an employee’s guaranteed base salary if they lack sufficient PTO to cover a productivity point deficit. On the contrary, an employee’s salary would only be reduced if they took a voluntary day off without sufficient PTO to cover it.

After her employment ended, Higgins filed a collective action against Bayada, asserting that the reductions in her PTO balance constituted an unlawful salary deduction in violation of the FLSA and the Pennsylvania Minimum Wage Act (PMWA), thereby converting her to an hourly employee entitled to unpaid overtime. The district court granted summary judgment for the company on these claims and certified the matter for immediate appeal to the Third Circuit.

Third Circuit Decision

On appeal, the Third Circuit affirmed the district court’s dismissal. Because the FLSA does not define the terms “salary” or “fringe benefits,” the court of appeals began with a close reading of the Act’s regulations. Those regulations provide that an employee is paid on a “salary basis” when they “regularly receive[] each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 U.S.C. § 541.602(a). Importantly, the employee “must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked,” id. at § 541.602(a)(1), and repeated deductions based on the quality or quantity of an employee’s work may transform the employee’s pay from salary-based to hourly. Id. §§ 541.602(a)(2) & 603(a).

Based on these regulations, as well as dictionary definitions of the terms “salary” and “fringe benefits,” the Third Circuit concluded that PTO deductions do not violate the “salary basis” regulations because, “when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of a pay period does not change.” Contrary to the plaintiff’s assertion, there was no evidence that Bayada ever reduced the guaranteed salary of her or any other healthcare worker if their PTO was exhausted.

The Takeaway

While the Third Circuit’s holding clarifies the issue under federal law for the courts in its circuit, the plaintiff did not properly preserve on appeal her corresponding claim under the PMWA and therefore the issue remains undecided under Pennsylvania law, as well as under the law in other federal circuits. Thus, while employers now have guidance as to their options for PTO deductions under federal law in the Third Circuit, they should be cautious in assuming that the same guidance will apply under state law or in other circuits.

If you have any questions about this decision, the “salary basis” regulations, or any other wage and hour question, please contact a Jackson Lewis attorney.

In the wake of the recently-announced and imminent departure of Secretary of Labor Marty Walsh for the National Hockey League Players Association, President Biden is expected to nominate Deputy Secretary of Labor Julie Su as Walsh’s successor to head the Department of Labor (DOL). Su has been in her current position since July 2021, and previously led the California Labor and Workforce Development Agency. This latter experience could create opposition to her nomination from Republican members of Congress. Conversely, Su has received ringing endorsements from a number of employee rights groups.

Secretary Walsh’s pending departure will leave two significant openings at the Department of Labor, as Biden’s nominee for the head of the DOL’s Wage and Hour Division, Jessica Looman, has yet to be confirmed by the Senate.

Jackson Lewis will continue to monitor and report any updates on these DOL developments. In the meantime, if you have any questions about these or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

The U.S. Department of Labor (DOL) has issued guidance on the application of the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) to employees who telework from home or from another location away from the employer’s facility. Field Assistance Bulletin (FAB) 2023-1, released on February 9, 2023, is directed to agency officials responsible for enforcement and provides employers a glimpse into how the DOL applies existing law and regulations to common remote-work scenarios. FAB 2023-1 addresses FLSA regulations governing “hours worked,” rules related to break time and privacy for nursing employees, and regulations regarding FMLA eligibility factors.

The details of FAB 2023-1 can be found at our Disability, Leave, and Health Management blog, here: DOL Issues Guidance on Handling Telework under FLSA, FMLA.

Although not yet officially announced, Secretary of Labor Marty Walsh is expected to leave the Biden Administration soon, to become the Executive Director of the National Hockey League (NHL) Players Association. Secretary Walsh has served as the head of the Department of Labor (DOL) since the beginning of the Biden Administration in 2021.

During Secretary Walsh’s tenure, the Wage and Hour Division (WHD) of the DOL has been quite active, rescinding final wage and hour rules concerning the status of joint employers and independent contractors, issuing a new independent contractor rule, and soon proposing revisions to the overtime rule concerning the salary requirements for the executive, administrative, and professional (EAP) exemptions. Walsh’s expected departure will leave the heads of both the DOL and the WHD vacant, as the Senate has yet to vote on the recent re-nomination of Jessica Looman as the WHD Administrator.

Deputy Secretary of Labor Julie Su likely will head the DOL in the interim and possibly will be the Biden Administration’s nominee to formally succeed Walsh. Prior to her current position, Deputy Secretary Su led the California Labor and Workforce Development Agency.

Jackson Lewis will continue to monitor and report any updates on these DOL developments. In the meantime, if you have any questions about these or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

On January 23, 2023, President Biden re-nominated Jessica Looman to formally become the next Director of the Wage and Hour Division (WHD) of the Department of Labor (DOL). Ms. Looman originally was nominated for the position in August 2022 and made it out of the Senate Committee on Health, Education, Labor, and Pensions in late November 2022, but no vote was held by the full Senate prior to the expiration of the last Congressional term.

Prior to joining the DOL as Principal Deputy Administrator of the WHD at the beginning of 2021, Ms. Looman was executive director of the Minnesota building trades coalition. She had been in position of Acting Administrator of the WHD since June 2021 but, due to regulatory requirements for agency nominees, her official title was removed while she continued to work during the nomination process. Ms. Looman is the second Biden Administration nominee for the WHD Administrator position, following the withdrawal of the original – and more controversial – nominee, David Weil.

Ms. Looman’s tenure at the WHD has been an active one, with the Division rescinding final wage and hour rules concerning the joint employer and independent contractor analyses, issuing a new independent contractor rule, and soon proposing revisions to the overtime rule concerning the salary requirements for the executive, administrative, and professional (EAP) exemptions. For further background regarding Ms. Looman and former nominee Weil, see our blog post, White House Nominates Acting DOL Wage & Hour Administrator to Lead Division.

Jackson Lewis will continue to monitor and report any updates on both Ms. Looman’s re-nomination and the status of the new overtime final rule that is likely to be proposed. In the meantime, if you have any questions about these or any other wage and hour questions, please contact the Jackson Lewis attorney(s) with whom you regularly work.

During the November 2022 elections, voters in several locations across the country approved minimum wage increases. Most notably:

  • District of Columbia voters passed the Tip Credit Elimination Act, which, by 2027, will result in the elimination of the tip credit in the District and require employers to pay tipped employees the full minimum wage.
  • Voters in Nebraska approved an incremental increase in the Cornhusker State’s minimum wage, which will reach $15 per hour in January 2026.
  • Nevada voters similarly passed an initiative to add a minimum wage provision to the state constitution, under which the minimum wage will increase from $10.50 to $12.00 effective July 1, 2024.

More details about these developments may be found in our article, Employers Should Note Post-Midterms State Law Changes.

Employers will need to monitor the effective dates of these increases, to implement systems that will ensure compliance, particularly where multiple adjustments are needed to account for changes that will be incremental over a period of several years, and also should verify that they are properly calculating tipped employee wages and overtime based on the new wage rates. This is especially important when providing any additional compensation or incentives, such as shift differentials, that must be included in the regular rate of pay for overtime purposes. Additionally, these measures may require employers to reevaluate their overall compensation structure, to determine how changes at the lower end of the pay scale affect pay equity in the organization.

If you have questions about any of these developments, please contact a Jackson Lewis attorney.

Since the COVID-19 pandemic began, thousands of pandemic-related lawsuits, including hundreds of putative class or collective actions, have been filed — and the number continues to grow. A large percentage of those lawsuits involve wage and hour claims, centered around issues including, but not limited to, failure to pay for pre-work COVID-19 screening and testing time, or failure to reimburse expenses for remote work.

Jackson Lewis attorneys focus on these and other types of COVID-19-related litigation at this stage of the pandemic, in the Fall 2022 issue of the Class Action Trends Report, available here.

On October 13, 2022, the U.S. Department of Labor (DOL) published a Notice of Proposed Rulemaking (NPRM), seeking to revise the standard for determining whether a worker is an employee or “independent contractor” under the Fair Labor Standards Act (FLSA). The NPRM proposes to withdraw the current regulations, issued during the last days of the previous administration, and essentially replace them with the standards that existed prior to those regulations.

In the NPRM, the DOL originally set a deadline of November 28, 2022, for the public to submit comments regarding the proposed regulations. Now, in response to complaints from several business groups and others that the 45-day comment period was too short to meaningfully analyze the proposed regulations, the DOL has extended the comment deadline by 15 days, until December 13, 2022. The lack of a “meaningful” review period was an issue that contributed to a federal court’s invalidation of the Department’s first effort to withdraw the current regulations.

For a full discussion of the NPRM and the history of the independent contractor analysis under the FLSA, see our article, What’s Old is New Again: Labor Department Flip-Flops on Independent Contractor Analysis.

Jackson Lewis encourages affected companies to comment on the NPRM and its attorneys are available to help evaluate the impact of the proposed regulations on an employer’s business operations.

We will continue to keep you updated on further developments. In the meantime, if you have any questions about the NPRM, the independent contractor analysis, or any other wage and hour issue, please consult the Jackson Lewis attorney(s) with whom you regularly work.

On October 12, 2022, the Supreme Court held oral argument to address the decision of the U.S. Court of Appeals for the Fifth Circuit in Hewitt v. Helix Energy Sols. Group, Inc., 15 F.4th 289 (5th Cir. 2021), cert. granted, No. 21-984 (U.S. May 2, 2022), and a corresponding split among the circuit courts of appeal regarding the application of Fair Labor Standards Act (FLSA) regulations for the “highly compensated employee” (HCE) exemption from overtime.

In Hewitt, the Fifth Circuit held that the employer’s day-rate pay structure did not satisfy the “salary basis” component of the “white collar” exemptions under the FLSA, even though the employee at issue unquestionably met the salary-level and duties requirements of the HCE variation of those exemptions. The Fifth Circuit further concluded that the employee did not meet a separate exemption requirement, namely, that there be a reasonable relationship between the employee’s total weekly pay and any weekly minimum salary he received.


In Hewitt, the plaintiff worked month-long hitches on an oil rig and was paid $963 for every day that he worked. He admittedly earned over $200,000 per year and supervised about a dozen other employees. On its face, this would satisfy the FLSA’s “highly compensated employee” (HCE) exemption from overtime, which requires a relaxed duties test and, at the time, annual compensation of at least $100,000 (now, $107,432).

However, the plaintiff argued that his “day rate” pay did not satisfy Department of Labor (DOL) regulations which, to satisfy the HCE exemption, require an employee’s pay to be calculated on a “salary basis,” generally defined as the regular receipt of a “predetermined” amount of pay “on a weekly, or less frequent basis,” the amount of which cannot be reduced due to “variations in the quality or quantity of work performed.” Further, the plaintiff relied on a DOL regulation indicating that an exempt employee’s guaranteed salary must bear a “reasonable relationship” to any additional pay received on a daily or hourly basis. He asserted that his “day rate” pay system was incompatible with these regulations.

In a sharply divided en banc proceeding, the Fifth Circuit concluded the plaintiff did not qualify for the HCE exemption because, even though his day rate pay was well above the $455 (now, $684) per week minimum salary required by the exemption, the pay structure failed to satisfy the regulatory requirement that an employee be paid a guaranteed weekly salary that complied with the “reasonable relationship” test found in Section 541.604(b) of the regulations.

In dicta, the Sixth and Eighth Circuit Courts of Appeal previously had reached the same conclusion regarding the exemption’s requirements. However, the First and Second Circuits previously had determined that the “reasonable relationship test” does not apply to highly compensated employees, at least for those paid a minimum guaranteed weekly salary. The Supreme Court granted certiorari to resolve these potentially conflicting interpretations of the regulations.

Supreme Court Oral Argument

During oral argument, questioning by the Justices appeared to demonstrate the convoluted nature of the salary basis regulations applicable to the executive, administrative, and professional (“EAP”) exemptions (also known as the “white collar” exemptions). This confusion becomes even more pronounced when dealing with the pay structures that have developed for highly compensated employees in the energy industry, such as the plaintiff in Hewitt.

During oral argument, several Justices pressed counsel appearing on behalf of the appellant-employer Helix Energy, on whether “salary” should be defined as a “stable” or “predictable” amount received each week. Appellant’s counsel asserted that the language of the regulations clearly specifies that the “salary basis” requirement simply establishes the minimum compensation that the employee must be paid each week; that the compensation does not vary based on the quantity or quality of work; and that an employee may receive more than that minimum and still be paid on a salary basis.

For example, he noted, Section 541.602 specifically provides that an employee is paid “on a salary basis” if the employee receives a predetermined amount that constitutes “all or part” of the employee’s compensation. The HCE exemption set forth in Section 541.601 specifically provides that the total compensation paid must only “include” $455, paid on a salary basis (the equivalent of about $24,000 annually), and thus the regulation appears to contemplate that the remainder of the $100,000 annual compensation requirement may be paid on a daily, hourly, or other basis. And importantly, appellant’s counsel argued, Section 541.601 is the most pertinent regulation because it specifically applies to the class of highly compensated employees such as the plaintiff. Consequently, appellant’s counsel argued, the separate “weekly, or less frequent” requirement of Section 541.602 and the “reasonable relationship” requirement of Section 541.604(b) should be inapplicable, irrespective of the day-rate structure of an employee’s pay.

Justices Kavanaugh and Gorsuch questioned whether the regulations are inconsistent with the statutory language of the FLSA, which does not address salary requirements at all, with Justice Kavanaugh even commenting that this would be a “strong argument.” However, both appellant’s counsel and the Justices acknowledged during the questioning that this argument was not squarely presented in the instant case.

Conversely, counsel for the plaintiff-appellee focused his oral argument on the common understanding of what it means to be a salaried employee and how the FLSA regulations purportedly capture that understanding. Because a “day rate” employee’s pay is calculated on a “daily basis,” and no set weekly amount of the compensation was guaranteed, such an employee can never meet the “salary basis” requirements of the regulations, he asserted.

The Takeaway

It is unclear how the Court will resolve the dispute over regulatory interpretation, yet its decision is certain to affect the pay practices of many oil, gas, and utility companies, given the prevalence of day rates and hybrid salaried/hourly pay structures in the energy industry.

Further, the Justices’ inquiries regarding inconsistencies between the salary regulations and the statutory text of the EAP exemptions may spark a new wave of litigation challenging the validity of the salary requirements. Their inquiries may suggest a belief that the salary regulations are outside the scope of the DOL’s regulatory authority under the “major questions” doctrine, invoked by the Court earlier this year in overturning an Environmental Protection Act regulation. That doctrine provides that Congress cannot defer significant issues of national policy to an administrative agency unless there is a clear expression of such intent.

Since the Court’s recent application of the major questions doctrine, a lawsuit challenging the DOL’s recent Tipped Regulations Final Rule has cited it as a basis for overturning the regulations. Thus, it is not inconceivable that the doctrine ultimately may come into play with respect to any or all of the salary regulations applicable to the EAP exemptions. Furthermore, when a federal district court enjoined, and ultimately invalidated, the DOL’s 2016 overtime final rule establishing a significant increase in the salary threshold for the “white collar” exemptions, that court relied on the plain language of the statute and the Chevron doctrine to conclude that “Congress intended the EAP exemption to depend on an employee’s duties rather than an employee’s salary.” Nevada v. DOL, 218 F. Supp. 3d 520, 530 (E.D. Tex. 2016); Nevada v. DOL, 275 F. Supp. 3d 795 (E.D. Tex. 2017) (invalidating the 2016 overtime final rule). Although the DOL changed course by implementing new salary requirement regulations in 2020, only time will tell whether new challenges to the validity of the salary regulations, inspired by the Justices’ comments, will gain traction in the courts.

Jackson Lewis will continue to provide updates on this case but, in the meantime if you have any questions about exemptions under the FLSA or any other wage and hour issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Washington State’s Department of Labor and Industries recently released a draft administrative policy with updated guidance on the modified pay transparency requirements beginning January 1, 2023. This draft policy aims to clarify issues raised by stakeholders in the feedback process for the development of the final administrative policy. The draft policy gives some new insight on several important topics.

Employers Covered

The guidance clarifies that the 15-employee threshold “includes employers that do not have a physical presence in Washington, if the employer has one or more Washington-based employees.”  Covered employers sponsoring foreign national employees for legal permanent residence (“green cards”) through the PERM process will have to comply with these requirements when conducting PERM recruitments.

Job Posting Defined

Job postings include openings for internal transfers as well as remote jobs, according to the new guidance. Stating in a posting that the employer will not accept Washington applicants does not excuse compliance with this law.  

Information Required

Each posting must include “the wage scale or salary range and a general description of all the benefits and other compensation for a specific available position to be offered to the hired applicant.” The new guidance provides detailed examples of information that should and should not be included. For example, the wage scale/salary range should have a low and high number, rather than open-ended descriptions, such as  “up to $29/hr” or “$60k and up.” Any starting pay or range should be specified. If there are multiple levels for a job, the pay scale for each level should be provided. If the employer offers a different job than what the applicant applied for, the employer should provide the postings for both jobs.

Postings also must include a general description of all benefits and other compensation. Benefits include items such as health care benefits, retirement benefits, any benefits permitting paid days off (including more generous paid sick leave accruals than the minimum required by law, parental leave, and paid time off or vacation benefits), and any other benefits that must be reported for federal tax purposes, such as fringe benefits. The guidance explains that “other compensation” can be discretionary bonuses, stock options, travel allowance, relocation assistance, profit-sharing, or other forms of compensation that would be offered to the hired applicant along with their established salary range or wage scale. Employers need not include monetary values but providing them does not excuse the requirement of the general description.

The guidance states that employers should update postings as this information changes.

The guidance also addresses how to use links regarding benefits and other compensation. The posting must have the “general description” of the benefits and other compensation, but employers can choose to link to more details, which must remain updated. If the benefits and other compensation information is available on the original or subsequent web pages, then the information needs to only be listed at least once. According to the Department, “[i]t is the employer’s responsibility to assure continuous compliance with functionality of links, up to-date information, and information that applies to the specific job posting, regardless of any use of third-party administrators.”

If you have any questions about the draft guidance, the upcoming pay transparency requirements, or any other wage and hour question, please contact a Jackson Lewis attorney.