Pharmacy Law: Overtime Pay: Are Pharmacists Paid on a Salary or an Hourly Basis?

A lawsuit turns on whether a pharmacist is exempt from the overtime pay standards of the Federal Fair Labor Standards Act.

Issue of the Case

Is a pharmacist entitled to overtime pay because the employer’s salary policy was “at its heart hourly-based,” meaning that pharmacists should not be considered exempt from the overtime pay standards of the Federal Fair Labor Standards Act?

Facts of the Case

A pharmacist employed by a pharmacy chain filed a class action lawsuit against the employer in a United States District Court in a mid-Atlantic state, alleging that the federal statute had been violated and time-and-a-half overtime pay was due under the federal statutory standard. The pharmacy corporation responded by filing a motion for summary judgment with the court, essentially requesting the judge to decide that there was no genuine issue of material fact and that, as a result, the matter should be decided in its favor without having a trial in the case.

The plaintiff-pharmacist was hired for a full-time position and classified as a “bi-weekly salaried pharmacist.” It should be noted that the employer had another category for pharmacists that was designated as “hourly pharmacists.” This pharmacist received a substantial signing bonus at the outset of the employment relationship, and he was told that he would be paid an annual base salary of $100,031, which was based on a 44-hour work week. The employment letter confirming the contract referred to him as a “salaried professional.”

The employer’s Pharmacy Payroll Policies stated that the “base salary is a guaranteed minimum amount” and that “all full-time pharmacists are paid at least their ‘base salary’ every week.” (Emphasis is in original policy document.) This stated policy came to the fore in this case because, even though the firm classified pharmacists as “salaried professionals,” it offered “premium pay” as an “additional incentive and reward for pharmacists who worked extra shifts and helped the company meet its service goals.” The pharmacist’s base hourly rate would be determined by dividing the base salary by 52 and then the weekly salary by the agreed-upon number of “base hours.” The result of that calculation had $6 per hour added to yield the “premium pay” hourly rate for these extra hours worked. The plaintiff in this case frequently worked 60 and 80 hours per week, resulting in paychecks that exceeded his “base” by 70%.

The pharmacist resigned from his position with the firm and 5 months later filed suit alleging that he had been improperly classified as “salaried professional.” His legal argument was that he was entitled to overtime compensation at the statutory rate of time and a half under the Fair Labor Standards Act. In response to initiation of the lawsuit, the employer moved for summary judgment as described above.

The Court's Ruling

The court ruled in favor of the employer, concluding that there was no genuine issue of material fact as to whether the pharmacist was compensated on a “salary basis” and exempt from the overtime provisions of the statute as a result. That ruling brought the mater to a conclusion; no jury trial was required.

The Court's Reasoning

The judge first addressed the standard to be applied when considering a motion for summary judgment. He concluded that summary judgment is appropriate when the moving party, the employer here, can show that “little or no evidence may be found in support of the nonmoving party’s case.” The nonmoving party, the pharmacist in this matter, must present “specific facts showing that there is a genuine issue for trial.” Reviewing all the information presented, the judge granted the motion for summary judgment.

The judge also addressed issues related to the Fair Labor Standards Act and the overtime pay provisions in that legislation. Two criteria exist for an employee to be considered falling under the “professional” exemption from overtime pay. The first relates to the duties assigned to the employee, known as the “duties test.” That was not at issue here because both the employee and employer agreed that the classification as a “learned professional” was appropriate.

The second criterion is the “salary basis test.” Here the court pointed to a regulation of the US Department of Labor that enforces the statute in question. This regulation addresses situations where an employee is paid on a salary basis, but may also be compensated for “hours worked for work beyond the normal workweek.” The federal regulation specified that “The exemption (from overtime pay) is not lost if an exempt employee who is guaranteed at least $455 each week paid on a salary basis also receives additional compensation based on hours worked for work beyond the normal workweek. Such additional compensation may be paid on any basis (eg, flat sum, bonus payment, straighttime hourly amount, time and one-half or any other basis) and may include paid time off.”

The court concluded and ruled that, indeed, the pharmacist was paid on a salary basis and the employer’s practice of paying the “premium pay” calculated on an hourly basis did not destroy the exemption from the overtime provisions of the federal statute.

Dr. Fink is professor of pharmacy law and policy and Kentucky Pharmacists Association Endowed Professor of Leadership at the University of Kentucky College of Pharmacy, Lexington.