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Federal Appeals Court Says PTO is Not Salary

In a recently decided court case, the Third Circuit Court of Appeals has ruled that paid time off (sometimes referred to as PTO) earned through an employee’s job does not count as part of their salary. As a result, deductions made from an employee’s PTO by their employer does not violate the Fair Labor Standards Act (FLSA). This case is the first of its kind to be decided at the Circuit Court level, meaning it may influence how other similar decisions are made.

 

What is This Case About? In Higgins v. Bayada Home Health Care Inc., 2023 U.S. App. LEXIS 6124 (3d Cir. Mar. 15, 2023), the plaintiff is a registered nurse who worked for the defendant between 2012 and 2016. As part of the employment arrangement, nurses working for the company earned “productivity points” every week they worked. They would be paid more if they exceeded their productivity points, but would have their PTO deducted for failing to meet their productivity goals. After her employment ended, the plaintiff filed suit claiming that these deductions were illegal, in violation of the FLSA and the Pennsylvania Minimum Wage Act. What Was the Legal Issue Being Decided? The question is whether an employee’s PTO counts as part of their salary for the purposes of the FLSA. The primary legal issue relates to the Fair Labor Standards Act, which prohibits deductions from a non-exempt employee’s salary except under certain specific situations, such as missing work for personal reasons unrelated to sickness or disability. If it does, then an employee’s paid time off cannot be deducted simply because an employee failed to meet productivity goals. What Did the Court Rule? In a ruling issued by the Third Circuit, it ruled that an employee’s PTO is not considered a part of their salary for the purposes of the FLSA. This means that the deduction scheme put forward by the defendant was legal, and they were allowed to deduct PTO without infringing on an employee’s rights. It also means the employee is not entitled to compensation for PTO that was deducted due to her failure to meet her employer’s productivity goals. Why Does This Matter? This is an important case because it is the first of its kind to be heard at the Circuit Court level. Although the Third Circuit only has jurisdiction over three states (Delaware, New Jersey and Pennsylvania), this ruling may have an impact on other similar cases that may find their way up to the Court of Appeals. If the ruling becomes influential, it could seriously affect employees’ ability to prevent their PTO from being taken away by their employers. Steven Mitchell Sack, the Employee’s Lawyer, is a New York employment lawyer with more than 41 years’ experience handling the many aspects of employment law. His new book, “Fired!: Protect Your Rights & FIGHT BACK If You’re Terminated, Laid Off, Downsized, Restructured, Forced to Resign or Quit,” is available in hardback, and contains valuable advice on dealing with employment and labor law issues. To purchase the book, feel free to contact Steven Sack at 917-371-8000 or visit the website at legalstratpub.com. To inquire about a legal matter, please feel free to contact attorney Steven Sack at 917-371-8000 or stevensackatty@hotmail.com.

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