Court: Employee making over $250,000 still gets overtime
On April 1, 2025, the Second Circuit Court of Appeals issued an opinion reminding employers that to be exempt from overtime, employees must be truly paid on a salary basis, meaning the pay should not fluctuate. This rule applies regardless of how much the employee is paid.
As background, the federal Fair Labor Standards Act (FLSA) entitles nonexempt employees to overtime pay. To classify an employee as exempt from overtime (and avoid paying overtime), under the FLSA, an employee must:
- Be paid on a salary basis,
- Be paid at least $684 every workweek, and
- Perform certain job duties.
The story
Lynwood worked for a labor contracting firm as a pipeline inspector. He was paid a guaranteed salary of $800 a week for any week in which he worked and $100 an hour for all hours worked over 8 in any workweek. He averaged 52 hours a week, or about $270,400 a year. The employer classified Lynwood as a salaried (exempt) employee, so it did not pay him overtime.
Lynwood believed that he was really an hourly (nonexempt) employee entitled to overtime pay, so he sued the company for FLSA violations.
The case and ruling
In court, the employer argued that employers may pay a salaried employee additional compensation without losing the exemption.
The court disagreed with the employer. It pointed to how the FLSA allows employers to provide a salaried employee with:
- A commission on sales,
- A percentage of profits, or
- Hourly pay for hours worked beyond the normal workweek.
An employee is not salaried, however, if he is paid based on a fixed hourly rate for hours worked within the normal workweek.
The employer used a system in which each employee’s pay turned solely on the number of days they worked each week.
It’s not enough for an employee to be guaranteed a fixed amount weekly, which merely makes up a small subset of his pay. Under the FLSA, salaried exempt employees must receive steady, predictable pay regardless of the number of hours they work. What makes a salary a salary is that it gives an employee a guarantee of compensation for all of their regular labor over a given period and thus allows them to decide for themselves the number of hours to devote to a particular task.
Lynwood was guaranteed payment for a single day’s work, but he wasn’t paid a salary. Unlike a weekly rate, which compensates an employee for a week’s work, no matter the number of hours worked, the rate Lynwood received compensated him for either an hour’s work or eight hours’ work.
His supposed “salary” of $800 — for one day’s work — simply did not count as a salary under the FLSA.
Pickens v. Hamilton Ryker IT Solutions, LLC, Sixth Circuit Court of Appeals, Nos. 24-5407/5459, April 1, 2025.
Key to remember: To be correctly classified as exempt from overtime, employers must pay employees a fixed, predictable salary that doesn’t fluctuate based on hours worked.