Fox Partner Mark Tabakman dives into the details of an unusual employee misclassification case in Texas:

This is a very interesting case.  A group of nurses at a Texas hospital claimed they their employer intended to pay them an annual salary rather than an hourly rate and thus they were owed no back wages.  They won in the lower court and appellate court but, now, the Texas Supreme Court has reversed, finding that there was insufficient evidence to substantiate that allegation.  The case is entitled McAllen Hospitals LP et al. v. Lopez and issued from the Supreme Court of Texas.

The Court set aside the judgments for the four workers, which totaled more than $389,000.  The Court noted that there was nothing in their yearly performance reviews, payroll change forms, Employee Handbook or any policy of the accounting or HR departments to indicate, much less explicitly state, that the nurses were paid on an annual, as opposed to an hourly rate.  Instead, the Court found that the nurses’ employer made it plain that they would only earn the annual salary if they worked at least forty hours per week in the following year.  The Court found in those years in which they worked less than 2080 hours, they would not receive as much money.

The Court stated that “we hold there is no evidence that would have allowed reasonable, fair-minded people to find that the employer and its employees had a meeting of the minds on a fixed amount of pay.  We therefore reverse and render judgment that the employees take nothing.”

The nurses worked as supervisors and were classified as exempt employees under the Fair Labor Standards Act.  On an annual basis, they met with their bosses to go over their yearly evaluations and to set their pay for the new year.

The Takeaway

If the nurses were hourly paid, they were then, by definition, non-exempt.  Why did not they win on that basis alone?  The only explanation it seems is that the nurses did not work more than forty hours in any week, because if they did they would be entitled to overtime regardless of whether their annual salaries were supposed to be a certain figure.  The important lesson here is that misclassification, in and by itself, means nothing unless the employees at issue actually work more than forty hours, i.e. overtime, in a week(s).

That is a very important point…