High Daily Pay Rates Can Satisfy FLSA’s Salary Exemption

Sherman & Howard L.L.C.

Sherman & Howard L.L.C.

The U.S. District Court for the District of Colorado decided that a sufficiently high day rate, although not a “salary” per se, was sufficient to satisfy the “salary basis” requirement for the FLSA’s white collar exemptions. Scott v. Antero Resources Corp., Case 1:17-cv-00693-WJM-SKC. The decision addressed a pay practice common in certain industries but questionable as applied to the white-collar exemptions.

Plaintiffs worked for Antero as drilling consultants and were classified as independent contractors. Plaintiffs alleged that they were improperly classified as independent contractors and were thus employees who were owed overtime compensation.

The Company paid Plaintiffs in monthly intervals a guaranteed day rate of at least $1,000 for a total of, at a minimum, $200,000 per calendar year. While the Company argued that the Plaintiffs were not employees, the Court assumed for purposes of its Opinion that the Plaintiffs were employees and only analyzed whether they were exempt from overtime because they were highly compensated or employed in an administrative capacity. Both exemptions require that employees be paid at least in part on a “salary basis.”

The Court determined that “Plaintiffs were compensated on a salary basis because their day rate guaranteed them $1,000 for every day that they worked and thus, perforce, they would receive more than the minimum of $455 per week for any week in which they performed any work.” (Note, the weekly rate has increased and is now $684). Indeed, in 2014, most Plaintiffs earned between $250,000-$350,000. The Court recognized that if it were to find that these “employees” were not exempt as highly compensated individuals, it “would be inconsistent with Congress’s ‘intent . . . to protect certain groups of the population from substandard wages and excessive hours which endangered the national health and well-being and the free flow of goods in interstate commerce.’”

While the Court correctly applied the FLSA’s regulations, common sense guided its ultimate conclusion that “employees” earning upwards of $250,000 are not the type of individuals Congress intended to protect under the FLSA.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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