On April 1, 2025, the U.S. Court of Appeals for the Sixth Circuit issued an important decision in Pickens v. Hamilton-Ryker IT Solutions, LLC regarding what it means to be paid on a “weekly basis” for purposes of the salary-basis test, a key factor in determining whether an employee is properly classified as “exempt” from the Fair Labor Standards Act’s (FLSA) overtime requirements.
Plaintiff Lynwood Pickens worked as a pipe inspector for Defendant Hamilton-Ryker IT Solutions (Hamilton-Ryker), an employment agency. Hamilton-Ryker paid Pickens a “guaranteed weekly salary” of $800—the equivalent of eight hours’ pay at Pickens’ $100 hourly rate—plus an additional $100 per hour for each hour worked beyond eight in any given workweek. Pickens worked between 28 and 83 hours per week over the course of his employment, an average of roughly 52 hours per week. But he did not earn any overtime pay because Hamilton-Ryker classified him as an exempt salaried worker.
Under the FLSA, an employer must generally pay an employee overtime for all time worked in excess of 40 hours in a workweek unless the employee clearly falls under one of the FLSA’s enumerated exemptions. See, e.g., 29 U.S.C. § 207. At issue in Pickens was the highly compensated employee (HCE) exemption, frequently referred to as one of the “white-collar” exemptions. Id. § 213(a)(1); 29 C.F.R. § 541.601. The HCE exemption requires that an employee be paid a total annual compensation of $107,432, which must include at least $684 per week paid on a “salary or fee basis.” See 29 C.F.R. § 541.601; see also DOL Fact Sheet #17H: Highly-Compensated Employees and the Part 541 Exemption Under the FLSA (Rev. Aug. 2024). The regulations underlying the FLSA provide two approaches for paying an employee on a salary basis:
- The employee must be paid “a predetermined amount” “on a weekly, or less frequent basis,” and receive that full amount “for any week in which [he] performs any work without regard to the number of days or hours worked.” 29 C.F.R. § 541.602(a)-(a)(1).
- Where an employee’s earnings are “computed on an hourly, a daily, or a shift basis,” the employee must be guaranteed a minimum amount per week (currently, at least $455) that is “roughly equivalent” to his “usual earnings.” Id. § 541.604(b).
Pickens brought suit under the FLSA on behalf of himself and a collective of 14 coworkers, alleging that they were misclassified as exempt workers and, as a result, owed overtime pay. The crux of Pickens’ claim was that he and others were not paid on a “salary basis” under either of the approaches prescribed by FLSA regulations, so they did not qualify for the HCE exemption.
On cross-motions for summary judgment, the district court ruled in favor of Hamilton-Ryker, holding that Hamilton-Ryker satisfied the salary basis requirement under Section 541.602(a) by paying Pickens a fixed $800 salary “on a weekly basis” that did not vary based on hours worked (plus additional compensation at an hourly rate).
A divided Sixth Circuit panel reversed.
According to the panel majority, under Section 541.602(a), it is not enough for an employer to guarantee its employee some fixed amount weekly. Rather, an employee must be guaranteed his full “weekly rate” for the general value of services performed. “[T]he fact that the payment is weekly must not be merely incidental to the payment; the week must serve as the fundamental unit around which the payment is structured.” And as the majority observed, Pickens’ $800 “‘salary’ did not come close to compensating him for his regular 52-hour workweek.”
The Sixth Circuit majority grounded its holding in Helix Energy Solutions Group v. Hewitt, 598 U.S. 39 (2023). In that case, the U.S. Supreme Court explained that a person is paid a salary under Section 541.602(a) only if he receives a predetermined amount that generally does not change based on how many days or hours he works. Like the plaintiff in Helix, however, Pickens was, in essence, only guaranteed pay for a single day’s work—the remainder of his paycheck depended on how many days or hours he worked during the week. Additionally, Hamilton-Ryker did not attempt to argue in the alternative that Pickens’ $800 weekly guarantee bore a “reasonable relationship” to his usual $5,200 per week earnings as required under Section 541.604(b), so it is unclear what might satisfy the “reasonable relationship” requirement.
The Pickens decision serves as an important reminder for companies to ensure that their compensation practices comport with both the text and the spirit of applicable law and regulations. Following the Helix decision, employers should expect courts to carefully scrutinize compensation terms and invalidate payment schemes that appear designed to avoid paying proper wages to workers, even if the employees are well-compensated.
If you have any questions about the topics discussed in this blog, please contact James P. Looby at jlooby@vedderprice.com, Michael D. Considine at mconsidine@vedderprice.com, or any Vedder Price attorney with whom you have worked.