The Fair Labor Standards Act (FLSA) requires that employers pay exempt employees on a salary basis, generally thought to mean a fixed amount regardless of hours worked.  But many employers have either considered or implemented programs that pay bonuses to exempt employees who work extraordinary hours (please don’t call it “overtime”!).  Some cautious lawyers worry that such bonuses may undermine the salary basis test for those employees.

A decision of the Eleventh Circuit on August 26, 2010 suggests that those concerns may be unfounded.  In Bell v. Callaway Partners, LLC, No. 10-11086, the court upheld such a bonus program even though the bonus was expressly calculated based on hours worked over 40 by a group of exempt employees.

The named plaintiff, on behalf of a putative class of about 100 accountants, complained about a system under which the employer paid a fixed salary of $1,600 per week, plus a bonus that was calculated based on hours worked during the week over 40, reduced by any hours under 40 per week that the exempt employee had worked in prior weeks.  So if in Week 1 an employee worked 38 hours, he or she would get just the fixed salary; if in Week 2 the employee worked 45 hours, s/he would get the $1600 plus a bonus of three hours’ pay — five hours over 40 in Week 2, less the two hours under 40 worked in Week 1.

Sounds like a risky approach, monitoring the hours worked of exempt employees so closely and calculating bonuses in this way.  But the Eleventh Circuit affirmed summary judgment for the employer, holding that “as long as there is a non-deductible minimum, additional compensation on top of the non-deductible salary is permissible.”  For that proposition the court cited only its decision in Hogan v. Allstate Ins. Co., 361 F.3d 621, 625 (11th Cir.2004) (copy here), which involved a much more traditional salary-plus-commission arrangement.

Though the Bell decision is short, and the discussion of the plaintiffs’ salary basis objection even shorter, the decision offers some comfort to employers who wish to recognize unusual contributions by their exempt employees.


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Photo of Mark W. Batten Mark W. Batten

Mark W. Batten is a partner in the Labor & Employment Law Department and co-head of the Class & Collective Actions Group.

Mark represents employers nationwide at all stages of complex employment litigation, including class and collective actions on wage and hour matters…

Mark W. Batten is a partner in the Labor & Employment Law Department and co-head of the Class & Collective Actions Group.

Mark represents employers nationwide at all stages of complex employment litigation, including class and collective actions on wage and hour matters and discrimination claims. Ranked by Chambers USA, Mark is hailed as “a fabulous lawyer, handling interesting and complex cases.” Clients “highly recommend him to anyone seeking litigation counsel in the Boston area,” as well as note “he is responsive, pragmatic and team-oriented, and offers excellent legal advice.”

He assists clients with all aspects of employment policies and practices, including hiring, termination, leaves, accommodation of disabilities, and other matters. Mark also handles diverse civil litigation, including litigation of noncompetition agreements, ERISA matters, discrimination and wrongful termination litigation in federal and state courts; proceedings before the Massachusetts Commission Against Discrimination; wage and hour matters; and labor arbitrations. He is also an experienced appellate attorney both in employment cases and other civil litigation, handling appeals at all levels in the state courts and in the United States Courts of Appeals.

Mark also has substantial experience with traditional labor matters. He regularly represents employers in a variety of industries, including a number of newspaper and media companies, in collective bargaining, practice before the NLRB, labor arbitrations, union organizing campaigns, and day-to-day advice on administration of collective bargaining agreements. He regularly advises clients in both union and non-union settings on diligence matters in corporate acquisitions and financings. He also has experience on behalf of securities firms in arbitrations before the NASD and NYSE of customer and employee complaints.

Mark also practices on behalf of newspapers and other media in newsroom litigation, including libel defense and representation of reporters under subpoena, and has substantial experience in litigation involving access to sealed records and judicial proceedings on behalf of media companies.

Before joining Proskauer, Mark was a trial attorney in the Civil Division of the U.S. Department of Justice in Washington, where he was lead counsel in major litigation for over two dozen federal agencies, ranging from the U.S. Air Force, the CIA, and the U.S. Secret Service to the Department of Housing and Urban Development and the National Endowment for the Arts.

Mark regularly writes and lectures on employment-related matters, including, for instance, MCLE’s Representing Clients Before the Massachusetts Commission Against Discrimination.

In his spare time, Mark is an experienced computer programmer, conversant in C, C++, and other languages. He has ported software between computer operating systems and has published several commercial computer games.