Eleventh Circuit: FLSA Exemption Tests Clarified

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APPLIES TO

All Employers with AL, FL, and GA Employees

EFFECTIVE

September 11, 2023

  

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Quick Look

  • Overtime exemption may apply where an employee receives a salary meeting the minimum requirements plus additional compensation paid on any basis, or where an employee is paid on a quantified basis with a minimum salary guarantee if there is a reasonable relationship between the guaranteed amount and the amount actually earned.

Discussion

In Wilson v. Schlumberger Tech. Corp., the Eleventh Circuit Court of Appeals clarified how the Fair Labor Standards Act (FLSA) overtime exemption applies. The FLSA regulations provide two options for an employer to prove that an employee is exempt from receiving overtime pay: (1) the employee receives the minimum weekly salary basis and may receive additional compensation paid on any basis; and (2) the employee’s earnings may be computed on an hourly, daily, or shift basis if they are guaranteed at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.

Here, an employee received a guaranteed base meeting the minimum exempt salary threshold regardless of the number of hours, days, or shifts worked, in addition to other hourly rates and bonuses depending on the situation. However, his hourly and bonus pay significantly exceeded the salary pay. The question became whether the first or second exemption test applied.

Ultimately, the court said that the first test applies when an employee receives a base salary and additional compensation, and the second test applies when an employee is merely guaranteed a minimum salary but is typically paid on an hourly, daily, or shift basis. Because the employee here received a fixed base salary and additional compensation in the form of hourly rates and other bonuses, the first test applied.

Action Items

  1. Have overtime exemptions reviewed for compliance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase