Background:
Last month, the Sixth Circuit Court of Appeals ruled in Pickens v. Hamilton-Ryker IT Solutions that an employee earning $270,400 annually was not exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”).
The case involved a pipeline inspector who was paid a fixed weekly salary for eight hours of work each week plus additional hourly pay at the rate of $100/hour. The employer considered the inspector to be exempt from overtime compensation under the “salary basis test”, which requires an employee to receive at least $684 each week and perform certain duties.
In making its determination that the pipeline inspector was not exempt from the FLSA’s requirements, the Sixth Circuit emphasized that a true salary remains constant regardless of hours worked, and the employee’s variable pay based on hours exceeding eight and based on a guaranteed portion of pay failed the “salary basis test.”
Takeaway:
This ruling from the Sixth Circuit underscores that simply paying employees more than the minimum of $684 is not enough to satisfy the salary basis exemption. Employers considering making their employees exempt should review their pay structure to ensure that it meets the technical requirements of the FLSA and consult with an employment attorney if they have questions. Failure to pay overtime when required can make employers liable for overtime premiums, an equal amount for liquidated damages, plus attorneys’ fees and costs.
A link to the decision is available here.