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Docking PTO Is Legal When Employees Miss Productivity Quotas, Third Circuit Rules

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By Richard Dahl | Last updated on

You might have thought that your PTO was sacred, but employees with minimum work quotas should now be wary. A federal appellate court has just ruled that employers can take away salaried employees' paid time off (PTO) when they fail to meet productivity quotas.

Involving employees of a nursing home facility, the case of Higgins v. Bayada Home Health Care, Inc., is a win for employers. The ruling makes clear that PTO is a fringe benefit that is distinguishable from an employee's base salary and can be deducted when they fail to meet quotas.

Background of the Lawsuit

A group of employees at the New Jersey-based Bayada Home Health Care filed a lawsuit against the company in 2016, claiming that it violated federal wage laws for deducting PTO when they fell short of their productivity quotas. Bayada is a nursing home facility that provides medical and other support services for patients in their homes. Employees who provided these services include registered nurses, physical therapists, and occupational therapists. The six named plaintiffs in the lawsuit worked there at various times between 2008 and 2018.

If Bayada employees exceeded their quotas, they received additional compensation. If they fell short, Bayada withdrew from their available PTO to supplement the difference between the points they earned and what they were expected to earn. Employers earned a guaranteed salary but were also expected to meet a certain number of "productivity points" each week. Each point was equivalent to about 1.33 hours of work. For example, a visit to a patient's home was worth one point.

In suing Bayada, the plaintiffs argued that they should not be exempt from overtime pay because the point system pegged their total compensation to the amount of hours they worked. They also claimed that the company intentionally misled them to believe that their pay would be docked if they didn't meet their productions points and their PTO was exhausted.

The Court Decision

On March 15, the Third Circuit Court of Appeals ruled that under federal wage laws, PTO is not part of an employee's salary. Therefore, they concluded, employers can deduct PTO if employees fail to meet their work quota—as long as the deductions don't affect their guaranteed base salary.

The ruling affirms a judge's 2021 decision granting summary judgment to Bayada and is the first time a federal appellate court was asked whether PTO counts as part of an employee's salary. The question is important because if PTO did count as salary, workers could become eligible for overtime pay if employers make deductions from their wages.

So, if you have a job with productivity quotas and you fail to meet them, be aware that your employer is within their rights to take away your paid time off.

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