961 F.3d 1039
8th Cir.2020Background
- Eighteen team leaders and production liaisons at Dassault Falcon Jet’s Little Rock facility sued under the FLSA and Arkansas wage law claiming unpaid overtime after June 6, 2014.
- Falcon Jet classified these employees as exempt and issued Payroll Notifications describing an "annual salary" and a biweekly "new rate;" employees were paid biweekly.
- Despite the exempt classification, employees were required to clock in/out and record hours; Falcon Jet computed an hourly rate by dividing the stated annual salary by 2,080 and used time records for cost accounting and pay adjustments.
- Falcon Jet deducted paid leave (vacation/sick) or unpaid FMLA/leave when recorded hours fell below 80 per biweekly period and sometimes reduced pay during plant shutdowns.
- The district court granted summary judgment for plaintiffs on the salary-basis issue, entered a Consent Judgment awarding liquidated damages, but preserved Falcon Jet’s right to appeal the salary-basis determination.
- The Eighth Circuit reversed, holding material disputes of fact exist about whether (and when) Falcon Jet’s payroll practices constituted impermissible deductions that would defeat the salary-basis requirement and thus preclude summary judgment for plaintiffs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether employees were paid on a salary basis under 29 C.F.R. §541.602 | Pay was computed and paid based on hours; salaries fluctuated and were subject to reductions, so no salary basis | Payroll notifications and pay practice guaranteed predetermined biweekly salary; hourly records were for accounting and permitted under DOL rules | Reversed district court: disputed facts exist whether the predetermined salary was "not subject to reduction"; summary judgment for plaintiffs inappropriate |
| Whether observed pay reductions (partial-day, shutdowns, FMLA, leave of absence) show an "actual practice" of impermissible deductions losing the exemption | Specific pay reductions prove employer made improper deductions and thus lost exemption for plaintiffs | Many reductions were lawful (unpaid FMLA, full‑day absences, full-week shutdowns); plaintiffs offered no affirmative proof those reductions were unlawful | Fact‑intensive inquiry required; disputed issues of fact and law preclude summary judgment for plaintiffs |
| Effect of Rule 30(b)(6) testimony (HR witness Cart) that salaries "fluctuated" | Cart’s admission demonstrates employer never intended fixed salary; supports plaintiffs’ summary judgment | Testimony described the hourly-record system and permissible practices but did not prove actual unlawful deductions occurred; can be rebutted by evidence | Testimony raises possibility of improper deductions but does not establish, as a matter of law, loss of exempt status; insufficient for summary judgment |
| Whether employees who always received at least the guaranteed minimum could be declared exempt at summary judgment | Employees who never received below the guaranteed minimum are exempt as a matter of law | Presence of alleged improper deductions to other employees and unresolved practice issues may affect exemption status across the workforce | Whether some employees are exempt cannot be resolved on this limited record; disputed facts prevent summary judgment for all |
Key Cases Cited
- Grage v. N. States Power Co., 813 F.3d 1051 (8th Cir. 2015) (standard of review and employer burden on exemption)
- Auer v. Robbins, 519 U.S. 452 (1997) (deference to Secretary of Labor’s regulation defining salary basis)
- Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44 (2011) (force and effect of administrative regulations)
- Ellis v. J.R.’s Country Stores, Inc., 779 F.3d 1184 (10th Cir. 2015) (exempt status not affected by tracking hours or leave-account deductions so long as salary not reduced)
- Litz v. Saint Consulting Grp., Inc., 772 F.3d 1 (1st Cir. 2014) (hourly payroll system may still satisfy salary-basis when no evidence of improper reductions)
- Hughes v. Gulf Interstate Field Servs. Inc., 878 F.3d 183 (6th Cir. 2017) (need for factual showing that guaranteed salary was indeed a matter of right, not grace)
- Kennedy v. Commonwealth Edison Co., 410 F.3d 365 (7th Cir. 2005) (isolated, negligible deductions insufficient to show a policy or practice of impermissible deductions)
- Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018) (FLSA exemptions are not to be narrowly construed against employers)