A recent 11th Circuit Court of Appeals case addressed the unusual question of whether an employer can go from exempt to non-exempt based upon the employer’s decision to withhold pay as part of an employment dispute. In the 11th Circuit ruling, it decided that, in this case, the employee remained exempt and could not pursue his employer for minimum wage law violations. The employee’s case was a matter for the state courts under a breach of contract cause of action, rather than a matter for a federal court under the Fair Labor Standards Act.
The dispute centered around the final weeks of Todd Pioch’s employment with IBEX Engineering Services, Inc. Pioch had served as a computer engineer with the company from 2003 to 2013. For several of his years with IBEX, Pioch collected per diem payments, even though, under his employer’s policies, he was ineligible to do so. In total, Pioch’s improper per diems totaled more than $147,000.
When Pioch resigned his job in 2013, the employer decided to withhold his final three weeks of pay in connection with the per diem issue. Since the employer essentially paid the engineer $0 for the engineer’s final three weeks of work, the employee sued IBEX for violating FLSA’s minimum wage rules. The employer countersued Pioch for unjust enrichment stemming from his wrongful receipt of the per diem payments.
The trial judge’s ruling had some bad news for each side. The court granted summary judgment to the employer on the minimum wage issue, concluding that, under FLSA, Pioch was an exempt employee and was not covered by the minimum wage rules. The judge also issued summary judgment in the employee’s favor on the employer’s unjust enrichment claim, concluding that this claim was prohibited by FLSA.
Both sides appealed. In the 11th Circuit, Pioch advanced the novel argument that, even though he was an exempt employee for the vast majority of his time with IBEX (because he made far in excess of the $27.63-per-hour pay ceiling for non-exempt employees established in the statute), he did not meet the exemption during his last three weeks with the employer because it paid him far less ($0) than the statutory $27.63 figure.
The appeals court was not persuaded. Pioch simply made far too much in wages for his nonpayment to be a federal minimum wage issue. The court, while acknowledging that “FLSA is generally applied on a weekly basis,” pointed out that the U.S. Department of Labor had “discussed a benchmark for yearly salaries calculated for 40-hour workweeks.” For computer engineers to qualify as exempt employees, the annual salary equivalent was a minimum of $57,470. Even without the three weeks’ pay that the employer withheld, Pioch still received around $180,000 during his final year with IBEX. Adopting Pioch’s interpretation on the breadth of FLSA’s minimum wage provisions would misapprehend “the social goals Congress sought” and “do violence to FLSA’s spirit.” In other words, the minimum wage laws were “designed to aid the unprotected, unorganized, and lowest paid of the nation’s working population,” not six-figure professionals like Pioch.
Pioch had qualified as an exempt employee throughout his career at IBEX. That did not change simply because the employer decided to withhold three weeks of pay at the end of his employment. Pioch’s case was a breach of contract case, not a minimum wage case.
Employers must be very careful in the way that they handle paying their employees to ensure that they are compliant with FLSA. To find out if your business (or your employer) is properly meeting the law’s obligations, consult the Georgia wage law attorneys at Mays & Kerr. Our attorneys have the knowledge and experience to give you the answers you need.
To speak with one of our lawyers about your situation, call 1-877-986-5529.
More blog posts:
Georgia Exotic Dancer Launches New FLSA Lawsuit Against Athens Club, Atlanta Employment Attorneys Blog, Jan. 13, 2016
Legal Shifts Are Giving Support to New Labor Movements, Atlanta Employment Attorneys Blog, Dec. 17, 2014