Employment-First Circuit Holds That Plaintiffs Are Highly Compensated Employees And Therefore Are Not Entitled To Overtime

In Litz v. The Saint Consulting Group, Inc., No. 13-2437 (1st Cir. 2014), the plaintiffs Crystal Litz and Amanda Payne (“plaintiffs”) claim unpaid overtime wages for their work as project managers for The Saint Consulting Group, Inc. (“SaintConsulting”). The district court concluded that plaintiffs were “highly compensated employees” and thus exempt from the overtime pay protections of the Fair Labor Standards Act (“FLSA”). 29 U.S.C. § 213(a)(1); 29 C.F.R. § 541.601. The plaintiffs appeal.

After analyzing the case, the First Circuit Court of Appeals (the “Court”) concluded that the district court was correct and affirmed the decision. Why? The Court noted that the FLSA requires employers to pay nonexempt employees at a higher rate for hours worked beyond 40 hours in a week. 29 U.S.C. § 207(a)(1). The FLSA exempts from its overtime protection any employee employed in a bona fide executive, administrative, or professional capacity. Id. § 213(a)(1). The FLSA implementing regulations further provide that this exemption applies to “highly compensated employees” who (1) customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee; (2) receive at least $100,000 in total annual compensation; and (3) receive at least $455 per week paid on a salary or fee basis. 29 C.F.R. § 541.601(a), (b)(1). Saint Consulting argues, and the district court agreed, that the plaintiffs satisfied these three requirements. The plaintiffs concede that they satisfied the duties requirement and earned well over $100,000 annually during the relevant time period, but they argue that they were not paid any amount “on a salary … basis” due to a $1,000 stipend paid each week that their hours were below a certain level.

The Court continued by saying that the stipend was paid on a “salary basis” if it was (1) a predetermined amount, (2) constituting all or part of the employee’s compensation, and (3) not subject to reduction because of variation’s in the quality or quantity of the work performed. Id. § 541.602(a). The facts establish that these conditions are met, and the Court concluded that the plaintiffs are highly compensated employees, not eligible for overtime.