Fifth Circuit: Day Rate Can Meet Salary Requirements Under FLSA White Collar Overtime Exemption


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August 21, 2019


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In Faludi v. U.S. Shale Solutions, L.L.C., the U.S. Court of Appeal for the 5th Circuit stated that a guaranteed day rate providing compensation over $455 can meet the Fair Labor Standard Act (FLSA) salary requirements for the white collar overtime exemption. Further, the FLSA’s reasonable relationship test does not apply to the highly compensated exemption.

Specifically, the court stated that since the employee there was guaranteed a $1,000 day rate for time worked and at least $455 per week, received on a weekly or less frequent basis, he was exempt from FLSA overtime requirements.  The court stated that the regulation only provided that the employee had to “regularly receive” a predetermined amount, in weekly or less frequent payments, which he did under his agreement. The agreement with the employer guaranteed the employee would receive more than the weekly minimum, since even if he worked for an hour a week, he was guaranteed the $1000, exceeding the $455 minimum.

The court also stated that the “reasonable relationship” test that states that the overall compensation must bear a reasonable relationship to the guaranteed salary, does not apply to those that meet the “highly compensated” exemption, with a current threshold of $100,000. The attorney clearly exceeded that threshold amount and the “reasonable relationship” test was irrelevant.

Action Items

  1. Have pay schedules reviewed for compliance.
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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.

© 2019 ManagEase

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