In the case of Schram v. Bilgi, Jackalyn Schram, who worked as an office manager for Dr. Jaya Bigli, filed a lawsuit against Dr. Bilgi under the Iowa Code and the Fair Labor Standards Act (FLSA). This lawsuit alleged nonpayment of vacation time and overtime compensation. The district court granted Schram only partial payment, which was for her unused vacation time. Schram’s FLSA claims were rejected because she was an exempt employee.
Schram decided to appeal this decision. The main issue was whether Schram was considered an exempt employee under the FLSA. Schram was paid on an hourly basis, starting at $18 per hour and gradually increasing to $24 per hour. Her compensation varied based on the hours she reported working each week. Despite regularly working over 40 hours per week, Schram did not receive additional overtime compensation like other employees. She argued that the hourly pay structure implied that she was a non-exempt employee.
The district court disagreed with Schram’s argument and concluded that she was exempt based on its decision on the “salary-basis test”. The burden of proof was on Dr. Bilgi to demonstrate that Schram met the test. Schram decided to appeal this decision. On appeal, the court examined the evidence and determined that Schram did not meet the salary-basis test for exemption. It found that Schram was paid on an hourly basis without a guaranteed minimum salary. The court emphasized the lack of documented guarantee or any mention of a minimum rate per week in Schram’s employment agreement.
The court decided that Schram was non-exempt and reversed the initial district court ruling. The case was remanded for further consideration.
Key lessons from this case:
- The FLSA’s salary-basis test requires employees to be compensated on a salary basis of not less than a specified amount to qualify for exemption from overtime pay.
- A payment arrangement based on an hourly rate may indicate that an employee is non-exempt and eligible for overtime pay.
- Employers should maintain clear documentation regarding employees’ compensation, including any guarantee of a minimum salary or hourly rate.
If you want to know more about overtime regulations, read our guide on Iowa Overtime Laws.
