Labor & Employment Law Daily Wrap Up, WAGE-HOUR—EXEMPTIONS—4th Cir.: Alexandria, Virginia fire department battalion chiefs were exempt from FLSA overtime requirements, (Jan 2, 2026)

By Jason Albright, J.D.

“But buckle up, for the chiefs’ pay matrix is best summed up this way: ‘Confusion now hath made his masterpiece.’ William Shakespeare, Macbeth act 2, sc. 3, l. 76.”

Current and former battalion chiefs for the City of Alexandria Fire Department in Virginia were exempt from the FLSA’s overtime pay requirements under the “highly compensated employee” exemption, the Fourth Circuit affirmed, despite a federal district court’s application of the incorrect salary basis test in drawing the same conclusion below. Applying the salary basis test in 29 C.F.R. § 541.602(a), which concerns employees paid on a weekly or less frequent basis, the Fourth Circuit found that the city paid the chiefs a predetermined amount, consisting of regular time and paid leave, equivalent to either 80 administrative hours or 106 operational hours. And because this amount was not subject to improper deductions “because of variations in the quality or quantity of the work performed,” the chiefs were paid on a salary basis under the regulation (Kelly v. The City of Alexandria, No. 23-1752 (4th Cir. Dec. 31, 2025)).

Highly compensated employee exemption. Department of Labor regulations, the appeals court initially observed, exempt “highly compensated employees” from the FLSA’s time-and-a-half overtime-pay requirement. 29 C.F.R. § 541.601(a); 29 U.S.C. § 213(a)(7). However, the exemption applies only to employees who are paid on a salary basis. 29 C.F.R. § 541.601(b)(1).

Two salary-basis tests. The regulations, in turn, set out two salary-basis tests, which appear at 29 C.F.R. § 541.602(a) and 29 C.F.R. § 541.604(b) and ensure that a given employer’s pay system “function[s] much like a true salary,” offering “a steady stream of pay, which the employer cannot much vary and the employee may thus rely on week after week.”

Section 602(a). Section 602(a) applies to employees paid on a weekly, or less frequent, basis. They are paid on a salary basis when they receive “at least part of [their] compensation through a preset weekly (or less frequent) salary” that isn’t “subject to reduction because of exactly how [much they] worked.”

Section 604(b). Section 604(b), in turn, applies to employees paid on an hourly, daily, or shift basis. They are paid on a salary basis if the employer guarantees “the employee at least $455 each week (the minimum salary level), regardless of the number of hours, days or shifts worked,” and the guarantee is “roughly equivalent to [their] usual earnings at the assigned hourly, daily or shift rate for [their] normal scheduled workweek.”

Ten battalion chiefs. The Alexandria Fire Department, according to the Fourth Circuit, has 10 fire stations, split evenly between two battalions. The department employs 10 battalion chiefs.

Rotating schedules. The battalion chiefs rotate through operational or administrative schedules. Typically, the department assigns six chiefs—three for each of the two battalions—to an operational schedule during which they’re responsible for the day-to-day operations of the fire stations within their assigned battalion. These chiefs are scheduled to work three 24-hour shifts according to a nine-day scheduling cycle.

Nine-day cycles. The nine-day cycles are staggered such that two operational chiefs are on duty each day, one for each battalion. During each nine-day cycle, the chiefs are on duty the first, third, and fifth days. They are off duty the remaining six days. Their “work period” is 28 days.

Administrative shifts. The remaining four chiefs work an administrative schedule and handle special assignments. They typically work 40 hours per week and their “work period” is 14 days.

Pay details. The city sets an annual base salary for each chief, which it uses to calculate two “hourly rates”: one for operational shifts and one for administrative shifts. The hourly rate for each shift is the chief’s annual base salary divided by the average annual scheduled hours for each shift. For administrative shifts, the city calculates the hourly rate by dividing the base annual salary by 2,080 hours. For operational shifts, the city divides the annual salary by 2,912 hours.

The chiefs are paid every two weeks, and each of these 14-day periods is a “pay period.” The city pays the chiefs, at the set hourly rate, for the following: the scheduled hours they work; the scheduled hours they do not work, with the city using paid leave for that purpose; and the hours they work off schedule.

Chiefs assigned to administrative work are scheduled to work 40 hours each week, and each paycheck compensates them for the 80 hours they are scheduled to work, including both paid leave for the hours they did not work and regular time for the hours they did, and for any off-schedule hours they work.

A wrinkle for operational shifts. The story is more complicated, the appeals court observed, for chiefs working an operational schedule. Their pay period, like that of chiefs on an administrative schedule, is 14 days, but their work period is 28 days. And because of their nine-day scheduling cycle, they do not work a consistent number of hours in each 14-day pay period. Thus, if the city paid them strictly based on scheduled hours, their paychecks could vary substantially from one pay period to the next.

To avoid that possibility, the city pays those chiefs for at least 106 hours each pay period, regardless of the scheduled hours they work. And the City also pays them for the off-schedule hours they work, at the chief’s hourly rate. The dispute in the case, the court observed, hinges on this last category of hours.

Lawsuit. The chiefs sued the city for unpaid overtime under the FLSA. They claimed that they were entitled to time-and-a-half pay for “overtime” hours, namely the off-schedule hours. The city, in turn, argued that the chiefs were exempt from the FLSA’s overtime-pay requirements.

Decision below and appeal. The district court granted summary judgment to the city, concluding that the chiefs’ pay arrangement met the requirements of the Section 604(b) salary basis test, which requires that employees receive a weekly guarantee of a minimum amount that bears “a reasonable relationship to their actual earnings in a normal scheduled workweek.” Because the chiefs were paid on a salary basis and met the other requirements for the exemption, the district court held, they were “highly compensated employee[s]” exempt from the FLSA’s overtime requirements.

They appealed to the Fourth Circuit.

Helix. The appeals court initially observed that the U.S. Supreme Court explained in Helix Energy Sols. Grp., Inc. v. Hewitt, 598 U.S. 39 (2023), that the “basis” on which an employee is paid determines which test applies. The “basis” is the “unit of time used to calculate pay.” When an employee is paid weekly or on a less frequent basis, Section 602(a) applies. When an employee is paid on a daily, hourly, or shift basis, Section 604(b) applies.

“[S]alary basis” and hourly-rate pay? The Fourth Circuit found that, “[a]lthough the issue is clear as mud, we think the district court applied the wrong salary-basis test.” The district court reasoned that the chiefs were hourly-rate workers because “in all two-week pay periods, when operational [chiefs] worked more than 106 hours and administrative [chiefs] worked more than 80 hours, their earnings directly correlated with the number of hours worked.” However, the chiefs were also paid for the off-schedule hours they work in pay periods in which they use leave. In these instances, the city paid the chiefs for scheduled hours they do not work—through leave—and so their pay was not “directly a function” of their scheduled and off-schedule hours.

Application of Section 602(a) to “hopelessly convoluted pay scheme.” “All considered,” the appeals court concluded, “we think the chiefs’ hopelessly convoluted pay scheme is a slightly better fit for what Helix described as 602(a)’s domain.” Each chief receives “a [predetermined] amount” equal to either 80 or 106 hours “[biweekly] no matter how many [hours] he has worked,” and this “preset, fixed amount” in each paycheck “reflects how many weeks—not... hours—he has worked.”

No improper deductions. To satisfy Section 602(a), the Fourth Circuit noted, city also had to show that it did not make improper deductions from this amount. The appeals court concluded that it did not.

The chiefs’ operational-schedule hourly rates were calculated by dividing their assigned “annual salary” by 2,912, the annual scheduled hours for an operational shift. In some years, however, the annual scheduled hours for some operational chiefs varied, and when that happened, those chiefs were paid slightly less than the annual salary amount used to calculate their hourly rates. From this, the chiefs argued that the city made “illegal deductions” because it “fail[ed] to pay the [annual] ‘base pay salary’ each year due to the quantum of hours they work in a year.”

The Fourth Circuit was unpersuaded. “An employer may not make deductions from the predetermined amount. 29 C.F.R. § 541.602(a). But that predetermined amount isn’t the annual salary figure the City assigns each chief—it’s the equivalent of 80 hours at the administrative-schedule rate or 106 hours at the operational-schedule rate.” At issue was whether the city reduced that amount “because of variations in the quality or quantity of the work performed,” and the district court properly concluded, based on payroll records, that the city had not done so.

The judgment of the district court was thus affirmed.

The case is No. 23-1752.

Judge: Diaz, A.

Attorneys: Gregg Cohen Greenberg (Zipin, Amster & Greenberg) for Anthony Kelly, Gregory Cook, Gerald Fair, Jack Hoffman, Christopher Kunkle, David Plunkett, Samuel Reyes, Frederick Ruff, Michael Sharpe, and Chad Lallier. David F. Dabbs (McGuireWoods) for The City of Alexandria.

Companies: The City of Alexandria, Virginia

Cases: WageHour Exemptions Overtime MarylandNews NorthCarolinaNews SouthCarolinaNews VirginiaNews WestVirginiaNews