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January 10, 2008
Did Paycheck Errors 'Blow' His Exempt Status?
A Massachusetts customer relations manager worked for a motorcycle retailer for about a year. After he was terminated, he sued the former employer for overtime, contending that two of his paychecks for the year had been wrong. From his point of view, that meant he wasn't a salaried, exempt worker.

What happened. Thomas Cash, shopping for a Harley Davidson in Boston, got to chatting with the store's general manager. Cash was subsequently hired, in April 2004, into a newly created customer service position for Boston Harley (officially called Cycle Craft, Inc.). Shortly after joining the staff, Cash wrote his own job description, which included such requirements as experience in customer service management and as a supervisor. He was paid an annual salary of $60,000--normally at the rate of $1,153.85 per week. Nearly a year later, the court opinion says, he "experienced an emotional problem at work" and was terminated that day.

Cash noted that he had been underpaid in 2 successive autumn weeks--one check was for $769.24 and the next for $961.55. The opinion gives no explanation for these shortfalls, and we assume the employer promptly made up the difference. But Cash used the two checks as evidence that Boston Harley had invalidated his exempt status, and he sued for overtime as a nonexempt employee under the Fair Labor Standards Act (FLSA). A judge in federal district court ruled that two mistakes didn't threaten his classification and dismissed the suit. Cash appealed to the 1st Circuit, which covers Maine, Massachusetts, New Hampshire, Rhode Island.

What the court said. Appellate judges reviewed the August 2004 revisions of FLSA regulations. They exempt from FLSA "any employee employed in a bona fide executive, administrative, or professional capacity?." That's the duties test rather than the salary-basis test, but judges noted that Cash also qualified for exemption based on his salary. And, they ruled that based on the job description he himself had written, his work was administrative, which made him exempt.

But had the two 'short' checks disqualified his exemption? Calling them "aberrant paychecks," judges said the mistakes did not amount to a practice that was inconsistent with Boston Harley's claim of exempt status for Cash. So his suit was again dismissed. Cash v. Cycle Craft, U.S. Court of Appeals for the 1st Circuit, No. 07-1768 (11/20/07).

Point to remember: Judges quoted this FLSA regulation: An employer "shall lose the exemption if the facts demonstrate that the employer did not intend to pay employees on a salary basis." That was clearly not true of Boston Harley regarding Cash.

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