Not making the case for recovering overpayments from exempt employees.
Employees must be paid in accordance with federal and state wage-and-hour-laws, including laws requiring overtime pay for hours worked in excess of 40 in a workweek. Some employees qualify for exemptions from these rules.
To be exempt, the specific requirements of the wage-and-hour laws must be met in their entirety and the exemptions are to be narrowly construed against the employer. Recently, Life Time Fitness found itself on the losing end of a lawsuit as a result of recovering allegedly overpaid bonus payments from apparently exempt employees by deducting overpayments from the employees' base salary payments. The case is interesting because it focuses on when deductions from base pay are permitted.
Background. There are several categories of exempt employees including administrative, professional, executive, and outside sales. In most cases, there is a three-part test that must be met:
(1) a duties test;
(2) a salary-level test; and
(3) a salary-basis test.
To be exempt, the employee must meet all three parts of the test. For example, if the employee performed the duties to be considered an executive employee and was paid a sufficient amount but the amount paid was based on hours worked, the employee would not qualify for the exemption.
Baden-Winterwood et al. v. Life Time Fitness Inc., No. 07-4437/4438 (6th Cir. …
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