Third Circuit holds deductions in paid time off do not equate to improper deductions in salary under the FLSA.

The plaintiff and several co-plaintiffs filed a collective action and putative class action, alleging that their employer made improper deductions from their accumulated paid time off (PTO) in violation of the Fair Labor Standards Acts (FLSA). The plaintiffs argued that the deductions in PTO, which the employer made when its salaried clinicians failed to meet productivity goals, were effectively improper reductions in their salary and, thus, violated the FLSA. However, the District Court disagreed, granting partial summary judgment for the employer and finding a distinction between salary and PTO under the FLSA. The plaintiffs subsequently appealed. In a case of first impression, the Third Circuit affirmed, holding that PTO is not a part of an employee’s salary and, therefore, a deduction in PTO, alone, did not constitute an improper deduction under the FLSA. In reaching this conclusion, the court looked to, among other things, the Department of Labor’s regulations concerning salary, specifically, the requirement that “an exempt employee . . . receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.” Relying on this language, the court reasoned that “[a]n employer does not violate those conditions by deducting from an employee’s PTO because, when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of a pay period does not change.” 

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