The “highly compensated” regulation is designed to relax the exempt status tests for the white collar exemptions for individuals who make more than $100,000 per year in total compensation. 29 C.F.R. § 541.601(a). Nevertheless, challenges to exempt classification of such workers can arise, with the employee claiming he or she still was non-exempt based on his or her job duties or arguing the specific compensation arrangement did not satisfy the salary basis requirement. A new decision recently upheld the applicability of the exemption for highly compensated employees and rejected the employee’s argument that the salary basis test was not satisfied. Litz v. St. Consulting Group, Inc., 2014 U.S. App. LEXIS 21055 (1st Cir. Nov. 4, 2014).
In Litz, the Plaintiffs, project managers for the defendant political consultancy, “earned well over $100,000 per year” under a compensation scheme where “their earnings equaled the number of hours they billed to clients multiplied by an hourly rate between $40 and $60.” The compensation plan guaranteed a minimum weekly salary of $1,000, regardless of hours billed. Plaintiffs argued that this did not constitute salary basis payment, citing language on paystubs and several communications from the employer implying that a circumstance could arise where the guarantee would not have been paid. In a strongly worded decision, the First Circuit opined that this view “simply ignores the economic reality of the guarantee . . . The fact that the [actual] pay was usually–but not always–high enough to render the guaranteed stipend unnecessary hardly means that the guarantee was not part of the employee’s compensation.”
Several courts recently have examined these types of exemption challenges and rejected them. Anani v. CVS RX Servs., 730 F.3d 146 (2d Cir. 2013). However, employers must consider their exposure to claims and assess their wage-and-hour compliance, regardless of the level of worker compensation, from tipped employees on up to executives.