U.S. Department of Labor (DOL) regulations implementing the exemption in the Fair Labor Standards Act (FLSA) for executive, administrative, and professional employees require that employees be paid on a “salary basis” to be exempt from the FLSA’s minimum wage and overtime requirements.
Although it would seem to be a fairly straightforward exercise to demonstrate whether an employee has been paid on a salary basis, a recent ruling by the Sixth Circuit Court of Appeals underscores the risks to an employer of losing the exemption in a situation where pay practices are not properly established and documented.
In Hughes v. Gulf Interstate Field Services, Inc., No. 17-3112 (6th Cir. December 19, 2017), the appeals court found that the employer could not adequately demonstrate that two employees earning more than $100,000 each were exempt from overtime under the FLSA regulations’ highly-compensated employee exemption because the employer could not show that they were paid on a salary basis.
A copy of the Sixth Circuit’s opinion in Hughes is available here.
Members of the Center for Workplace Compliance (CWC) can read more here.