Third Circuit: PTO is Not “Salary” for FLSA Purposes

The Third Circuit, in an issue of first impression, has held that paid time off (PTO) is not a type of salary under the Fair Labor Standards Act (FLSA) (see Higgins v. Bayada Home Health Care, Inc.).  The plaintiff in this case was a nurse who worked for the defendant.  As an employee, the plaintiff was required to adhere to certain weekly productivity minimums, which were expressed in points.  Employees who exceeded their productivity minimums earned extra money.  When an employee failed to meet their minimum, their employer reduced their paid time off (not their base salary).  The plaintiff claimed that the reduced PTO balance constituted an unlawful salary reduction that violated the FLSA.  The Third Circuit agreed with the defendant that the plaintiff's base salary constituted her salary and that deductions in PTO did not reduce that predetermined salary.  For more information on the rules governing fringe benefits, visit Tax Facts Online.  Read More: Q 8909.