Recent developments in federal law may see companies facing costly litigation brought by corporate pilots seeking to recover overtime back pay.
Businesses that own private aircraft and employ pilots for corporate travel are undoubtedly familiar with the normal hazards of flight and are likely to have insured themselves against personal injury and property damage liability.
Unfortunately, though, a liability policy cannot insure against another danger associated with employing a corporate jet pilot: the risk of overtime pay litigation under the federal Fair Labor Standards Act. As it stands, recent developments in federal law call into question the practice of classifying highly-skilled pilots as professional employees who are exempt from the FLSA’s overtime pay requirements. The changes could leave employers vulnerable to costly litigation brought by pilots seeking to recover overtime back pay.
Although the courts in Michigan have yet to address the question of whether corporate private jet pilots are professional employees for purposes of the FLSA’s overtime pay requirements, employers can take certain cost-productive steps now to prepare for the possibility of overtime pay litigation brought by their pilots.
Generally speaking, the federal overtime pay rule does not apply to any “employee employed in a bona fide professional capacity,” which means any employee who is compensated on a salary or fee basis at the rate of not less than $455 per week and, in the case of pilots, whose primary work “is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment, as distinguished from performance of routine mental, manual, mechanical, or physical work.” Most often, a professional employee must hold an advanced degree.
Pilots, many of whom command annual salaries of $100,000 or more, occupy a “gray area” under the FLSA, particularly with respect to whether they qualify as exempt “professional employees.” While the longstanding position of the Department of Labor’s Wage and Hour Division is that pilots do not qualify for the professional employee exemption, the Division also takes the position of nonenforcement with regard to pilots who meet certain requirements, such as holding specific FAA pilot certificates.
Courts, however, are not bound to follow the Division’s nonenforcement stance, and federal circuit courts are split on the issue of whether pilots are “professional employees.” In a 1983 case from the 5th Circuit Court of Appeals, which covers Louisiana, Mississippi, and Texas, the court held that a company pilot was properly classified as a professional employee because the pilot exercised significant discretion in the course of his work, and had hours of specialized instruction and numerous FAA licenses that “were functional equivalents” of an advanced degree. Conversely, in a 2010 decision from the 3rd Circuit Court of Appeals, which covers Delaware, New Jersey, and Pennsylvania, the court found that helicopter pilots were not exempt professional employees because they were not required to hold advanced degrees and obtained much of their training in-flight.
The unsettled position of the law in this area leaves businesses open to lawsuits brought by pilots seeking to recoup overtime back pay. In addition to the expense of litigation itself, and the months or years of back pay an employer could owe, the possibility of substantial liquidated damages under the FLSA looms large for any employer that is unable to establish that its classification of an employee under the federal act was made in “good faith” and on “reasonable grounds.”
Because courts examine whether the employer took affirmative steps to ascertain the FLSA’s requirements when assessing whether the employer had reasonable grounds to classify an employee under the FLSA, the best defense to a lawsuit for overtime pay involving the classification of a pilot as a professional employee under the FLSA should start well before a lawsuit is even brought. This endeavor should include a thorough review and analysis of pilot training and education, certification requirements, and the structure of the employment relationship with the pilot.
By thinking ahead, well-prepared employers can diminish the unnecessary risk associated with the ownership and operation of corporate aircraft: the risk of overtime back pay litigation brought by professional pilots.