5th Circuit changes course on whether day rate satisfies test for FLSA exemptions

To qualify as exempt from receiving overtime pay under the administrative, executive, professional, or highly compensated employee exemptions to the Fair Labor Standards Act (FLSA), an employee must be paid on a “salary basis” at a rate of not less than $455 per week. Federal regulations provide an employee is paid on a salary basis if (1) he receives a predetermined amount in each pay period, on a weekly or less frequent basis, and (2) the salary is paid “without regard to the number of days or hours worked.”

Late last fall, the U.S. 5th Circuit Court of Appeals (which covers employers in Mississippi, Louisiana, and Texas) decided a guaranteed day rate exceeding the $455 threshold met the salary basis requirement even if it wasn’t calculated on a weekly or less frequent basis (see “Is day-rate payment sufficient to satisfy the requisite salary basis test for FLSA exemptions?” in the November 2019 issue of Mississippi Employment Law Letter). But the appellate court’s opinion on that issue was short-lived. And in April 2020, the court changed its course.

Facts and findings

In the April case, Michael Hewitt, who worked as a tool pusher for the Helix Energy Solutions Group for more than two years, contended the employer hadn’t paid him on a salary basis because it calculated his pay based on a daily, rather than a weekly, rate. The employer pointed out the daily rate was greater than the weekly salary requirement of $455. Therefore, so long as Hewitt worked at least a single day during any particular week, he would receive more than the weekly salary requirement.