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FLSA Misclassification Can Be Very Costly

May 12, 2025

The “salary basis” requirement is a necessary element in deciding whether an employee qualifies under the Fair Labor Standards Act’s executive, administrative, and professional exemption. To qualify, an employee must be paid on a salary basis at least $684 a week and perform certain duties. In order to qualify for the reduced duties test for highly compensated employees, an employee must annually earn at least $107,432.

Recently, the Sixth Circuit Court of Appeals, which includes Michigan, held that for an employee to be paid a salary, the employee must receive a consistent payment each week that is not dependent on the number of hours worked. In Pickens v. Hamilton-Ryker IT Solutions, Pickens, a pipe inspector, filed a claim under the FLSA for unpaid overtime compensation. Mr. Pickens alleged that his employer misclassified him as an exempt employee, and he should have been classified as a non-exempt employee entitled to overtime pay. Mr. Pickens was paid $100 per hour with a guaranteed weekly amount of $800. Mr. Pickens also received $100 an hour for all hours in a week that he worked over eight hours.

According to the Sixth Circuit, under this overly flexible pay practice, Mr. Pickens was really paid hourly and not a fixed salary. Mr. Pickens’ employer failed to pay Mr. Pickens a salary because his weekly guaranteed pay of $800 was not equivalent to a true week of work and was not equivalent to his usual actual weekly earnings. (Mr. Pickens averaged approximately $274,000 per year). To be paid a salary, the employee must receive a predetermined amount each pay period that does not fluctuate based on the number of hours worked. Here, Mr. Pickens’ weekly pay varied greatly depending on how many hours over eight that he worked. Consequently, his weekly guarantee did not function as a true salary even where it exceeded the minimum weekly salary threshold of $684.

If you have any questions about this topic, please contact Dean E. Leazenby or any member of Warrick & Boyn, LLP.

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From all of us at Warrick & Boyn, a heartfelt thank you to the moms who have shaped our lives and our community. Your guidance, support, and wisdom have made an immeasurable impact on who we are today.Wishing all Michiana moms a very happy Mother's Day! 💐 ... See MoreSee Less
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When your work involves something you're passionate about, it hardly feels like work at all! Our partner Rachel Schnetzler spent last week atBrewers Associationation Craft Brewers Conference in Indianapolis. As an expert in alcohol licensing and regulations, Rachel attended numerous educational seminars to stay ahead of developments affecting our craft beverage clients. She also enjoyed special events hosted by local breweries and connected with current clients and new industry contacts.Rachel even spent time with her father, the owneMad Anthony Brewingewing, and other brewing veterans she's known for years. These personal connections, combined with her legal expertise in alcohol licensing and regulations, make Rachel an invaluable resource for craft beverage businesses throughout Indiana and Michigan. We're proud of her commitment to understanding every aspect of this vibrant industry!Do you have questions about alcohol law and licensing? Visit WarrickAndBoyn.com/contact/ to connect with Rachel and put her experience, knowledge, and industry connections to work for you. ... See MoreSee Less
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