Patrick Miller-Bartley
Tue, 08/01/2023
Last Monday, the Fifth Circuit Court of Appeals in Gentry v. Hamilton-Ryker IT Solutions, LLC, upheld a lower court’s ruling that two engineers making between $200,000 and $300,000 per year were entitled to overtime pay because they were not compensated on a “salary basis.” The Fair Labor Standards Act (FLSA) requires that employers pay employees at least 1.5 times those employees’ hourly rate for each hour they work over 40 in a week. However, certain “executive, administrative, and professional” employees are exempt from this requirement; this is referred to as the “white-collar exemption.” To qualify for this exemption, however, employers must, among other things, pay employees on a “salary basis.”
The guiding principle of the “salary basis” requirement is that an employee’s pay generally should not fluctuate with the hours that he works. The United States Supreme Court held this past February, in Helix Energy Solutions Group, Inc. v. Hewitt, that an offshore oil rig worker who was compensated at a “day rate” was not a salaried employee because his pay structure meant that, if he worked fewer days, he would receive a smaller salary. As the Supreme Court explained, the relevant regulations require that a salaried employee’s compensation not be divvied up into units smaller than a week; inherent in receiving a salary is “the stability and security of a regular weekly, monthly, or annual pay structure.” As such, even though the employee there earned over $200,000 dollars a year, because he was not paid on a salary basis, he was entitled to overtime.
Similarly, in Gentry, the two engineers at issue earned $123 and $150 per hour, respectively. Under their pay structure, if they worked any amount of time in a week, they would receive eight hours of pay, as well as their hourly rate for all hours worked over eight. However, offering employees such a guarantee does not automatically mean they are paid on a “salary basis.” Rather, the guaranteed amount must be “reasonably related,” or similar, to the amount the employee usually takes home. In a practical sense, if an employee who usually makes around $5,000 a week works fewer hours and receives only his $984 guarantee—as was the case in Gentry—that employee’s salary is fluctuating based off the amount he is working, and is not functioning as a salary at all.
As the Supreme Court explained in Helix Energy, “workers are not deprived of the benefits of the [FLSA] simply because they are well paid.” Rather, if your employer wants to claim the white-collar exemption, they must, among other things, pay you on a true salary basis. McGillivary Steele Elkin’s experienced labor attorneys know the FLSA, and can help you understand, and vindicate, your workplace rights if necessary. If you have questions about how you are being paid, do not hesitate to contact us.
