Tag Archives: Salary Basis Test

Sixth District Holds That Hours-Based Compensation That in Practice Delivered an Unvarying Minimum Amount of Pay Still Not a Salary

A de Beers 3d staff salary token given to empl...

A de Beers 3d staff salary token given to employees and only usable at their stores (Photo credit: Wikipedia)

The Sixth District held on Thursday that an hours-based compensation system which was based on the number of hours worked, with no guaranteed minimum cannot be considered a salary, and therefore cannot serve as the basis for an exempt classification.  Negri v. Koning & Associates, No. H037804, __ Cal. App. 4th __ (6th Dist. May 16, 2013).  Plaintiff is an insurance claims adjuster who was paid $29 per hour with no minimum guarantee.  Slip Op. at 1.  When he worked more than 40 hours in a week, he was still paid at $29 per hour.  He brought a claim for overtime pay, and the trial court issued a defense verdict, concluding that plaintiff was an exempt employee.  Id. at 3.

The Court of Appeal reversed:

We recognize that, in practice, defendant always paid plaintiff the equivalent $29 per hour for 40 hours per week so that he, in effect, received an unvarying minimum amount of pay. We also recognize that, as a general matter, an exempt employee may be paid extra for extra work without losing the exemption. (See Kennedy, supra, 410 F.3d at p. 371.) The problem here is that defendant stipulated to the fact that it “never paid [plaintiff] a guaranteed salary”; if he worked fewer claims “he made less money than if he worked more claims.” That is the same thing as saying that plaintiff was not paid “a predetermined amount” that “was not subject to reduction based upon the quantity of work performed.” He was not paid a salary. For that reason, defendant did not prove that the administrative exemption of Wage Order 4 applies in this case.

Slip Op. at 8-9.

By CHARLES H. JUNG

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