April 7, 2022 – A public sector nurse whose salary was broken down as an hourly amount and who was paid extra hourly compensation was an exempt employee under the federal Fair Labor and Standards Act (FSLA), the Wisconsin Court of Appeal has ruled.

In Magnussen v. State, 2021AP538 (April 5, 2022), the Court of Appeals District I held that the nurse was an exempt employee because she met the criteria for an exception for salaried employees.  

Hired With a Salary

Sarah Magnussen is a registered nurse who was working as a nurse clinician with the Wisconsin Department of Corrections (DOC).

When she was hired, Magnussen received an appointment letter stating that she would be paid a salary (based on an hourly rate) on a bi-weekly basis.

Under the FLSA, employees must be paid at least time-and-half when they work more than 40 hours a week.

But the act provides an exemption, commonly called the “professional exemption,” to the overtime requirement for employees “employed in a bona fide executive, administrative, or professional capacity.”

DOC considers nurse clinicians exempt from the overtime requirement under the professional exemption.

Pay Beyond Salary

DOC nurse clinicians receive pay in addition to their salary.

For instance, Magnussen received an additional $10 per hour when she worked weekends. Nurse clinicians also receive an additional $1 per hour when providing direct patient care.

Additionally, DOC nurse clinicians receive extra pay when they work more than 40 hours a week.

Circuit Court Rules for State

Magnussen filed a lawsuit in Milwaukee County Circuit Court. She argued that DOC should consider her and the other nurse clinicians as non-exempt hourly employees under the FLSA.

In support of her argument, Magnussen cited the following:

• she was required to record her hours;

• her additional pay was calculated on an hourly basis;

• twice she was paid less than her minimum salary.

Additionally, Magnussen argued that even if she was an exempt employee, her salary was not reasonably related to her total compensation as required by 29 C.F.R. section 541.604(b).

The state argued that Magnussen was an exempt employee because she met the criteria for the “salary-basis” test set out in 29 C.F.R. section 541.602(a) – each pay period she was paid a predetermined amount that made up all or part of her pay, and her pay could not be reduced because of the quality or quantity of her work.

The state also argued that the reasonable relationship requirement didn’t apply because her salary was not calculated on an hourly, daily, or per-shift basis.

The circuit court ruled that Magnussen was an exempt employee because she met the salary basis test, and granted summary judgment for the state. Magnussen appealed.

Public Accountability Exception

Writing for a three-judge panel, Chief Judge William W. Brash III explained that Magnussen still qualified as an exempt employee even though DOC had twice paid her less than her minimum salary.

Under the public accountability exception, Judge Brash noted, government employers may dock the pay of a worker who’s exempt under the salary basis test if the worker works less than that minimum number of required hours.

“This public accountability exception is grounded in the fact that government employment positions are funded by taxpayer money,” Judge Brash wrote.

“Thus, government employers track their employees’ hours … because the public expects government workers to be available during normal business operating hours.”

Exempt Despite Hourly Tracking

That DOC required Magnussen to track her hours didn’t mean she wasn’t an exempt employee under the salary basis test, Judge Brash explained, because her pay “‘consists of a guaranteed predetermined amount plus additional compensation.’”

“This rule was confirmed in an Opinion Letter by the United States Department of Labor on this issue,” Judge Brash wrote.

And the fact Magnussen’s salary was broken down in an hourly rate in her appointment letter had no effect on her exempt status under the salary basis test, Judge Brash wrote.

“The State calculates an hourly pay rate for all employees, regardless of exemption status. This is due in part to principles of public accountability.”

Exempt Despite Extra Hourly Pay

The extra hourly pay that Magnussen receive did not negate her exempt status, Judge Brash explained.

Under 29 C.F.R. section 541.604(a), employers may pay a salaried employee extra pay without losing the exemption if the employer has guaranteed the employee a minimum required weekly salary.

“This additional compensation ‘may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off,’” Judge Brash wrote.

Exemption Criteria Were Met

The appellate panel held that Magnussen’s pay clearly met the criteria established by 29 C.F.R. section 541.604(a) – she was paid a set amount each pay period regardless of how many hours she worked, except for reductions allowed under the public accountability exception.

This was so despite the fact DOC broke Magnussen’s salary down into an hourly amount.

“The fact that her compensation is broken down into an hourly amount – as is the case for all State employees’ compensation – does not translate into her wages being ‘computed on an hourly, daily, or shift basis,’ as required for the application of section 541.604(b) and the reasonable relationship requirement,” Judge Brash wrote.