5th Circuit: Follow salary basis test or lose FLSA overtime exemptions

On May 24, 2024, the U.S. Court of Appeals for the 5th Circuit in New Orleans (which covers Louisiana, Mississippi, and Texas) upheld a district court’s decision that two highly compensated IT engineers were not properly paid on a salary basis and, therefore, not exempt from the Fair Labor Standards Act’s (FLSA) overtime requirements. The 5th Circuit’s opinion reiterates that no matter how much money an employee earns, a guaranteed weekly salary must be paid in accordance with the FLSA’s specific rules and regulations to maintain most exemptions from the overtime pay requirements.

Highly compensated IT engineers sue for overtime pay

IT engineer Terry Gentry filed suit on behalf of himself and a putative class alleging that his employer Hamilton-Ryker IT Solutions (HR-IT) violated the FLSA’s overtime protections by failing to pay overtime wages to its nonexempt, hourly employees. IT engineer Marc Taylor joined the lawsuit.

Both men were paid on a two-tiered system. They received a “guaranteed weekly salary” equal to up to 8 hours of pay calculated at their hourly rates ($125 and $150 per hour). Then, for any hour they worked beyond 8 hours, they were paid at their hourly rates. This same hourly rate was paid for hours worked over 40 in a workweek.

HR-IT argued both men were exempt from the FLSA’s overtime requirements under either the “highly compensated employee” (HCE) or the “learned professional” exemption. The issue for the court was whether they were paid on a salary basis, a requirement for both exemptions.