For many positions to be exempt under the Fair Labor Standards Act (FLSA) it must meet three tests to be Executive, Administrative, or Professional (EAP) exempt. Exempt positions do not have to be paid overtime at time and one-half (1.5x) or keep records of hours worked. The three exemption tests are:
- Paid on a salaried basis
- Paid a salary of at least $684/week
- Meet the job duties tests for Executive, Administrative, or Professional (Learned or Creative)
The Sixth Circuit Court of Appeals, which includes Michigan in its jurisdiction, ruled earlier this month on a case addressing a key factor for what it means to be paid a salary on a “weekly basis” in order to be classified as an exempt employee.
In this case the Plaintiff was a pipe inspector for the Defendant. To inspect pipes, he was paid a “guaranteed weekly” salary of $800. This was the equivalent of eight hours or pay at a set rate of $100/hr. Further he was paid an additional $100/hr. for each hour worked beyond eight hours in each workweek. The Plaintiff would normally work between 28 and 83 hours per week and averaged approximately 52 hours per week over the course of a year. Because the Defendant classified him as exempt under the Highly Compensated Employee (HCE) exemptions he was not paid overtime if he worked over 40 hours in a week. To be an HCE, a job must be paid at least $107,432/yr. and do at least one primary duty under one of the EAP exemptions.
The Plaintiff argued that he and some of his fellow pipe inspectors were not paid a guaranteed “predetermined amount” on a weekly or less frequent basis as required by the FLSA under 29 C.F.R. Sec. 541,602(a)-(a)(1).
The lower federal court found in favor of the Defendant-employer holding that it satisfied the salary basis test because it paid Plaintiff a fixed salary - $800 on a “weekly basis”.
The Sixth Circuit Court of Appeals reversed the lower court's decision and further narrowed the interpretation of “weekly basis” by reasoning “it is not enough for an employer to guarantee its employee some fixed amount weekly.” It must guarantee an employee’s full “weekly rate” for services performed. The Court further held that the fact the payment is weekly must not be incidental but “must serve as the fundamental unit around which the payment is structured.” Because the $800/week guaranteed salary did not come close to compensating him for his regular 52-hour workweek, this was fatal to the exempt classification of the position.
This decision was based on the Helix Energy Solutions v. Hewitt case (598 U.S.39) handed down by the Supreme Court in 2023. That case looked at another highly compensated position where the employee was paid over $900/day to work on an oil rig. Because the person worked for extended periods of time, he earned well over the HCE level of pay and into the mid $200Ks per year. The Supreme Court stated that just because the person could make over $107,432/year and met the duties test, the employer still had to guarantee a weekly salary. Because this highly paid worker earned his pay on a daily basis, it did not meet the FLSA’s salary basis test.
This case should warn employers not to get “cute” around the exemption tests. Employers are advised that their compensation practices must meet both the text and the spirit of the FLSA. Just because the employee is well compensated and paid a salary, does not allow an employer to avoid legal payment of wages.
ASE Connect
FLSA Changes and Working with Exempt/Non-exempt Classification Analysis
June 18, 2025 | 1:00 p.m. – 4:30 p.m.
Troy, MI
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Participants will take a hands-on approach to determine the test specifications for Executive, Professional, and Administrative exemptions. This course will teach participants how to identify what information needs to be collected and validated to correctly assign exempt or non-exempt status to the employee.
Sources: Lexology, Vedder Price Vedder Works newsletter. Sixth Circuit Clarifies Requirements for a Salaried Employee to Be “Paid on a Weekly Basis” Under the FLSA. (4/21/2025)