Can Employers Reduce PTO for Productivity Shortfalls?

April 7, 2023

The 3rd Circuit Court of Appeals recently held that an employee failing to meet productivity quotas may see their paid time off (PTO) docked by their employer.


This is the first time that a federal court of appeals has heard a case in which the question was whether PTO counts as part of an employee’s salary. The 3rd Circuit encompasses Delaware, New Jersey, and Pennsylvania. But, it is possible that we may see this precedent impact compensation and benefits across the nation.


In the case of Higgins v. Bayada Home Health Care, the court held that an employer did not violate the Fair Labor Standards Act (FLSA) when it deducted PTO from salaried workers who failed to meet their productivity goals.


Bayada Home Health Care established a productivity system for salaried employees. In this system, employees who exceeded the goals received extra pay, and employees who failed to meet the goals saw their PTO reduced.


In 2016, a group of nurses, physical therapists, and medical social workers initiated legal action against Bayada for the reduction in their PTO. The employees argued that PTO was part of their salary and therefore the reduction was a violation of the FLSA.


A federal district court disagreed and dismissed the employees’ claim. The 3rd Circuit has now affirmed the lower court’s ruling, holding that PTO is not part of an employee’s salary and therefore, the reductions are not a violation of the FLSA.



If your business has any questions on this topic or any other matters, please do not hesitate to contact the attorneys at The Royal Law Firm at 413-586-2288.

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