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The Fair Labor Standards Act exempts "highly compensated employees" from overtime requirements. So what qualifies as "highly compensated"? And what's the difference between a salary and a stipend? Technical questions, to be sure, but ones that have a huge impact on determining whether an employee is entitled to overtime.
The First Circuit answered these questions earlier this month in Litz v. The Saint Consulting Group.
Not Val Kilmer's 'Saint'
Crystal Litz and Amanda Payne worked for The Saint Consulting Group, which provides political consulting around the country to land development projects. Project managers like Litz and Payne earn "well over $100,000 per year." Based on their client billings and paychecks, they were working more than 40 hours per week, but they didn't receive overtime pay.
Instead, Saint guaranteed them at least $1,000 a week, whether or not they billed any hours. For any amount over $1,000, Saint multiplied the hours worked by the employee's hourly rate.
The FLSA doesn't apply overtime requirements to "any employee employed in a bona fide executive, administrative, or professional capacity." Department of Labor regulations add to this professional or administrative employees "who receive at least $100,000 in total annual compensation" and are paid "at least $455 per week" in salary or fees.
A Stipend? A Salary? Does It Matter?
What's this case doing here, then? The plaintiffs claimed that the $1,000 minimum was a "stipend," not a salary. Because the money was paid at a predetermined amount as part of their compensation and couldn't be reduced, the court found that it was a salary, foreclosing plaintiffs' recovery for overtime.
Wage and hour cases, as we've reported before, are on the rise all over the country. If you're not paying your employees overtime for some reason, take care to explain why and make sure you use the appropriate terms. While the plaintiffs in this case wanted to keep using the word "stipend," the First Circuit said it really didn't matter whether it was called a salary or a stipend; it still performed the function of a salary. But it's still a good idea to use the right terminology so employees don't think they're getting underpaid.