Negri v. Koning & Associates: Pay Based On Number of Hours Worked Is Not A "Salary" For Overtime Exemption Purposes

Negri v. Koning & Associates (5/16/13) --- Cal.App.4th ---, addresses "whether a compensation scheme based solely upon the number of hours worked, with no guaranteed minimum, can be considered a 'salary' within the meaning of the pertinent wage and hour laws" for purposes of determining whether an employee fits within one of the white collar exemptions. The answer is no.  

A salary is generally understood to be a fixed rate of pay as distinguished from an hourly wage. Thus, use of the word “salary” implies that an exempt employee's pay must be something other than an hourly wage. 

Slip op. at 4-5.  

Relying on the rule that state wage law must be at least as protective of employees as federal  wage law, the Court held: 

Since federal law requires that, in order to meet the salary basis test for exemption the employee would have to be paid a predetermined amount that is not subject to reduction based upon the number of hours worked, state law requirements must be at least as protective. 

Slip op. at 6.  

The unique factor here is that the defendant paid the plaintiff $29 per hour and never paid him for less than 40 hours in a week. Regardless, it stipulated in the trial court that it did not pay him a "guaranteed salary." In other words, it did not pay him "a predetermined amount" that "was not subject to reduction based upon the quantity of work performed." Slip op. at 9. No salary having been paid, the employer could not prove that the exemption applied. 

The opinion is available here.