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Pharmacist Receiving Total Compensation in Excess of $100,000 Not Entitled to Overtime Pay


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Hanson

By Doug Hanson

The pharmacist received additional compensation for work exceeding forty-four hours per week.  The compensation for the extra work was paid according to an hourly compensation rate calculated by dividing his weekly guaranteed salary by forty-four.  This amount plus six dollars per hour was paid for each hour worked over forty-four hours.  The pharmacist typically worked an additional sixteen to thirty-six hours per week, which extra work was voluntary.  This increased his total compensation in each relevant year to an amount exceeding $100,000.  

FLSA Section 207(a)(1) provides employees working more than forty hours per work week must receive time-and-a-half compensation.  This provision, however, is inapplicable to “any employee employed in a bona fide executive, administrative, or professional capacity.”  An employee must meet both a duty requirement and a salary requirement to qualify for this exemption.  The parties agreed the duty requirement was met.  Accordingly, the court focused on the salary aspect of the exemption.

To invoke the exemption, an employee “must be compensated on a salary basis at a rate of not less than $455 per week.”  The term “salary basis” requires “the employee regularly receives each pay period on a weekly basis, 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.”  The “employee must received the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.”

The pharmacist’s salary exceeded $455 per work week.  There were no impermissible deductions.  The salary was guaranteed or to be paid regardless of the number of hours actually worked.  The court then addressed an additional regulation relating to the salary requirement.  This regulation provides an exemption for employees with total annual compensation exceeding $100,000 if the employee customarily or regularly performed one or more exempt duties or responsibilities of an executive, administrative or professional employee.

The pharmacist contended the exemption was inapplicable where an otherwise exempt employee’s earnings are computed on an hourly, daily or shift basis and there is a “minimum guarantee plus extras.”  Regarding extras, an employer may provide additional compensation without losing the exemption if the employment arrangement provided a guarantee of “at least the minimum weekly-required amount paid on a salary basis.”  This provision permits additional compensation to be computed and paid in a straight-time hourly amount.

The pharmacist also averred a reasonable relationship did not exist between the guaranteed salary amount and the amount actually earned.  He argued the relationship between the guaranteed salary and the total earnings was unreasonable because his total earnings substantially exceeded his guaranteed salary.  His total earnings exceeded his guaranteed salary at a ratio of slightly less than a 2 to 1 ratio.  The court rejected this argument reasoning it would vitiate the highly compensated employee exemption for those employees earning in excess of $100,000.  Any reasonable relationship or ratio requirement is applicable only to employees receiving less than $100,000 annually.

The pharmacist earned in excess of $455 in guaranteed salary per week and received in excess of $100,000 annually.  Whether a reasonable relationship exists between the guaranteed amount and the amount actually earned is not a consideration when the employee receives in excess of $100,000.  Accordingly, the court concluded the pharmacist was an exempt employee under the FLSA and was not entitled to time-and-a-half overtime compensation.

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