When A Salary Is Not A Salary

A federal judge recently ruled that managerial employees of supermarket chain Gristedes were not paid on a salary basis, which may open the door to a large verdict against the company. The lawsuit filed by managerial employees alleges that the company misclassified them as executive employees who are exempt from the overtime pay requirements of the federal Fair Labor Standards Act, which requires among other factors that the employee be paid on a salary basis. Although Gristedes claimed that it paid the employees a weekly salary, it deducted pay from the workers’ weekly paychecks for hours worked. Thus, the court ruled that the workers actually were paid on an hourly basis.

Federal overtime law requires an employer to pay workers one and one half times their normal rate of pay, or “time and a half”, for time worked above forty hours in a work week unless the employer can prove the employee meets a specific exemption. Gristedes attempted to classify its managerial employees under the executive exemption, which typically applies to managers who are paid on a salary basis, supervise two or more employees, and have input in hiring, firing, and other decisions regarding employment status. With regard to the Gristedes employees, the court held that because the supermarket deducted pay from their paychecks for time not worked, the employees were not paid on a salary basis, and therefore the employer could not prove they met the requirements of the exemption.