Current and former battalion chiefs in the Alexandria Fire Department in Virginia sued the City of Alexandria seeking unpaid overtime under the Fair Labor Standards Act. The chiefs argued that they were entitled to time-and-a-half pay for “off-schedule” hours they worked beyond their normal shifts. The United States District Court for the Eastern District of Virginia granted summary judgment for the City, concluding that the chiefs were exempt from the FLSA’s overtime requirements as “highly compensated employees.” The Fourth Circuit affirmed, although it held that the district court had applied the wrong regulatory test in reaching that conclusion.
The dispute centered on whether the chiefs were paid on a “salary basis,” a prerequisite for the FLSA’s “highly compensated employee” exemption. The Alexandria Fire Department employs ten battalion chiefs who rotate between operational and administrative assignments. Chiefs on operational schedules work three 24-hour shifts during a nine-day cycle and have a 28-day work period. Chiefs assigned to administrative roles typically work a 40-hour workweek and have a 14-day work period.
Although the City set an annual base salary for each chief, its payroll system translated that salary into hourly rates for operational and administrative shifts. Chiefs were paid every two weeks. Administrative chiefs were paid for 80 hours each pay period, while operational chiefs were guaranteed pay equivalent to at least 106 hours each pay period, regardless of the number of hours actually worked. Chiefs also received additional compensation for “off-schedule” hours. Because operational chiefs’ schedules varied from pay period to pay period, the City used paid leave and other payroll mechanisms to ensure that each paycheck reached the predetermined amount.
The chiefs argued that this system effectively made them hourly employees entitled to overtime under the FLSA.
The district court rejected that claim, applying the salary-basis test that governs employees paid on an hourly, daily, or shift basis under 29 C.F.R. § 541.604(b). The court concluded that the City’s guaranteed pay levels and compensation structure satisfied that test and therefore placed the chiefs within the highly compensated employee exemption.
On appeal, the Fourth Circuit agreed that the chiefs were exempt from overtime, but concluded that the district court had analyzed the case under the wrong regulation. The appellate court held that the chiefs were not truly hourly employees and therefore should have been evaluated under the salary-basis test in 29 C.F.R. § 541.602(a), which applies to employees paid on a weekly or less frequent basis. The Court explained that the presence of an hourly rate in payroll records does not itself make a worker an hourly employee. Instead, courts must look at “how employees are actually paid.”
Applying that approach, the Court determined that the chiefs were paid a predetermined amount every pay period regardless of the number of hours worked. As the Court explained, “[a]n hourly-rate worker’s weekly pay is always a function of how many hours he has labored,” but that was not true here. Even if a chief worked fewer than 80 or 106 hours in a pay period, the City still paid the predetermined amount. Likewise, if a chief worked off-schedule hours, the City paid additional compensation without reducing the guaranteed base amount.
The Court also rejected the chiefs’ argument that the City made improper deductions from salary. The relevant predetermined amount was not the annual salary figure referenced in personnel documents but the guaranteed biweekly pay equivalent to 80 administrative hours or 106 operational hours. Payroll records showed that the City consistently paid at least that amount and did not reduce it based on variations in the quality or quantity of work performed.
Because the chiefs received a fixed, predetermined amount every pay period and any additional compensation for extra hours was permissible under the regulations, the Court held that they were paid on a salary basis. As a result, they qualified for the FLSA’s highly compensated employee exemption and were not entitled to overtime. The Fourth Circuit therefore affirmed the district court’s judgment in favor of the City.
Kelly v. City of Alexandria, — F.4th —-, 2025 WL 3770096 (4th Cir. Dec. 31, 2025).