HR Management & Compliance

6th Circuit: Highly Paid Workers Sometimes are Entitled to Overtime Under FLSA

The 6th Circuit—which covers Kentucky, Michigan, Ohio, and Tennessee—recently ruled that two welding inspectors who earned more than $100,000 a year may have been entitled to overtime pay under the Fair Labor Standards Act (FLSA).overtime

Facts

In 2013 and 2014, “Angus” and “Norm” worked as welding inspectors for Gulf Interstate Field Services. Both employees received an offer letter stating they would earn $337 per day in addition to a weekly computer stipend. Inspectors were paid based on a 6-day workweek at 10 hours a day. If they worked more than 10 hours a day, they did not receive additional pay. During their employment with Gulf, Angus and Norm earned more than $100,000 per year.

In May 2014, Angus and Norm filed a lawsuit against Gulf alleging violations of the FLSA and the Ohio Minimum Fair Wage Standards Act. Gulf asked for summary judgment (dismissal without a trial), arguing that Angus and Norm met the definition of “highly compensated employee” and were exempt from overtime requirements under the FLSA and Ohio law.

The district court granted Gulf’s motion for summary judgment. The welding inspectors appealed, and the 6th Circuit reversed the district court’s decision and sent the matter back to the lower court for further proceedings.

6th Circuit’s Decision

The FLSA requires that employees receive additional compensation if they work more than 40 hours in a week. However, employees who work in an executive or professional capacity, often referred to as “highly compensated employees,” are exempt from the overtime payment requirement. Three tests are used to determine whether an employee meets the exemption requirements: (1) the duties test, (2) the salary-level test, and (3) the salary-basis test.

In this case, the court evaluated whether the inspectors satisfied the salary-basis test. An employee satisfies the salary-basis test if he “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of [his] compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.”

The parties disputed whether the welding inspectors’ pay was calculated on a weekly or less frequent basis (such as daily or hourly). Further, the parties disputed whether the inspectors’ pay was “guaranteed.”

Gulf argued that the welding inspectors were exempt from overtime because their pay totaled more than $100,000 a year. Further, Gulf’s position was that the inspectors’ pay was guaranteed and amounted to being paid on a weekly basis. In response, the inspectors argued that their pay was based on hours worked and was not guaranteed, even though they earned more than $100,000 per year.

The 6th Circuit panel reversed Gulf’s summary judgment win, finding there was a genuine issue of material fact regarding whether the inspectors were guaranteed pay that qualified as a minimum weekly salary. The court held that if the inspectors are to qualify as exempt employees under the FLSA, the determination of whether their weekly salary was guaranteed is significant. Accordingly, the 6th Circuit sent the case back to the lower court for further evidentiary proceedings on the issue. Hughes v. Gulf Interstate Field Services, Case No. 2:14-cv-00432 (6th Cir., Dec. 19, 2017).

Takeaway

Federal appellate courts recently have been split on what types of workers qualify as exempt employees. Thus, there likely will be more litigation on this issue until the U.S. Supreme Court takes it up. Until the Supreme Court provides direction, employers should evaluate whether employees whose pay is based on hours worked are entitled to overtime, even when their annual pay exceeds $100,000.

Rebecca Kopp Levine, a contributor to Ohio Employment Law Letter, can be reached at 216-443-2554 or rlevine@porterwright.com.