About a month ago, the 4th Circuit affirmed a
decision from the District Court of Maryland in a wage and hour collective action
brought against Rite Aid. In the case, a
number of pharmacists brought suit alleging that the pharmacy’s policy of
allowing for unpaid personal leave only in full-day increments once an employee’s
paid leave was exhausted meant that they were entitled to overtime pay. The pharmacists claimed that they should have
received overtime because the unpaid leave policy destroyed their exemption
from federal and state wage and hour laws.
The case centered around the salary basis test, which is necessary
for a professional employee to be exempt from federal and state wage and hour
requirements. The pharmacists claimed
that Rite Aid’s unpaid personal leave policy was an unauthorized deduction from
their salaries that destroyed the benefits of the exemption. The employees specifically argued that
because the policy only allowed for unpaid leave in full-day increments and not
hourly increments, it forced them to take time off that they otherwise would
not have chosen to have taken.
Essentially, the pharmacists argued that the full-day policy improperly
deducted wages for less than a full-day’s absence and that it was thus created
only for the pharmacy’s benefit.
Essentially, the employees wanted the option to take less than full-day
unpaid leave, and return to work at the completion of their leave.
The employer’s argument was as follows: “Rite Aid admitted that it created the policy
partially for its benefit. Rite Aid must have a pharmacist on staff at all
times when the pharmacy is open. As such, partial-day absences are problematic
for its business operations. The company, however, argued that the unpaid-leave
policy did not destroy the exemption because the applicable implementing
regulations of the wage and hour laws specifically allow for deducting from
wages for full-day absences without affecting the exempt status of
administrative, executive, or professional employees.”
The 4th Circuit agreed, and
especially was persuaded by the company’s argument that it did not force anyone
to take the leave. The Court noted that
if the pharmacists’ theory held true, employers would simply not offer the
benefit of unpaid personal leave in full-day personal increments if employees
would lose their exempt status.