In a recent decision arising out of an overtime pay case filed on behalf of a class of welding inspectors who earned more than $100,000 in total pay per year, an appeals court addressed the issue of whether or not such earnings were “guaranteed”.  If their earnings were not guaranteed, they could not be properly classified as exempt from the labor laws on overtime pay under the highly compensated exemption.

This is a very important decision and one that illustrates an often misunderstood exemption to the overtime pay requirements for all types of highly paid workers, not just those with oil and gas related jobsIn short – the mere fact that an employee ends up making more than $100,000 a year does not disqualify them from overtime pay…unless this pay is guaranteed and their job duties satisfy at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.  This common misconception by both employers and employees frequently leads to workers being denied substantial amounts of overtime compensation to which they are legally entitled.  Error in employer’s favor – fewer dollars in employee’s pocket.  Use this overtime pay calculator to see how much misclassification could cost you.

What Does the DOL Say about Overtime Pay?
Specifically, according to the Department of Labor:

A highly compensated employee is exempt from the federal overtime pay laws only if ALL these requirements are met:

  1. The employee earns total annual compensation of $100,000 ($107,432 as of 1/1/2020) or more, which includes at least $455* ($684 as of 1/1/2020) per week paid on a salary basis;
  2. The employee’s primary duty includes performing office or non-manual work; and
  3. The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.

*Note: The Obama Administration increased the minimum “exempt” salary amount to $47,476 effective 12/1/16 but the increase was blocked by a court ruling.  Instead, the Trump Administration only increased the minimum “exempt” salary to $35,568 per year as of 1/1/2020.  Please see this page for the latest updates.

It is the first requirement that was at issue in the welding inspectors’ claim brought under both the Fair Labor Standards Act (FLSA) and the comparable Ohio Minimum Fair Wage Standards Act (OMFWSA), asserting that they were entitled to overtime pay for weeks in which they worked more than forty hours (typically working 60 hours per week).  The case turned on two issues: (1) whether it matters, for purposes of the salary-basis requirement, whether at least arguably day-rate workers were guaranteed the requisite minimum weekly salary, and (2) if so, whether there was in fact such a guarantee. The court concluded that it does matter, and that there was a genuine question as to whether such a guarantee existed under the facts of this case.

While the inspectors acknowledged that they were paid in a manner and at a rate consistent with being exempt from overtime, they argued that those facts did not resolve their entitlement to overtime pay –  unless their salaries were actually guaranteed.  Supporting the workers’ argument that they were only guaranteed pay for days that they actually worked was the fact that they each received an offer letter stating that they were entitled to, in addition to a weekly per diem and computer stipend, a salary of “$337.00/Day Worked” and rate sheets exchanged by the companies noting a “Daily Rate” to be “paid on days worked.”  The company, however, took the position that inspectors were told orally that they would be working “six days a week” and ten hours a day, (aka six 10s) and would be paid for six days even if they worked less, although this detail was not mentioned in the offer letters.

In deciding in favor of the workers, the court noted that “[a]n employer…, cannot have it both ways: it must either provide its employees with the clear protection of a guaranteed weekly salary against the eventuality of its deciding to reduce their days, or it must forgo the benefits of a clear exemption.”  Even though the employer in this case did not actually reduce their days, the employees were not protected against such a decision and the resulting loss of pay.

Because the timeframe for recoveries are relatively short (2-3 years in most cases), even if they are eventually made to pay, the exposure companies face will often be only be a small fraction of the wages they avoided paying over many years – so the company ends up ahead, with higher profits, all at the expense of its workers who trusted that they were being paid fairly and in accordance with federal and state overtime pay laws.

Procrastination can be costly.  If you are not certain that you are properly classified, get more information on state and federal labor laws governing payment of overtime wages by contacting us or submitting your information using our convenient Case Evaluation form for a FREE and CONFIDENTIAL review of your circumstances.