Fifth Circuit Confirms A Day Rate of $1,000 Meets the Salary Requirements Under The FLSA’s White Collar Overtime Exemptions

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Attorney Harrison Oldham

On August 21, 2019, the U.S. Court of Appeals for the Fifth Circuit issued an opinion in Faludi v. U.S. Shale Solutions, L.L.C. that settled an important question, finding that a guaranteed day rate that provides compensation exceeding  at least $455 per week can meet the Fair Labor Standard Act (“FLSA”) salary requirements for the white collar overtime exemptions.

In Faludi v. U.S. Shale Solutions, the plaintiff was an attorney that provided strategic solutions to the oil and gas company as an independent contractor. As part of his agreement with the company, the attorney was guaranteed a rate of $1,000 per day for each day he performed services for the company, making his annualized compensation approximately $260,000. Pursuant to the agreement, the plaintiff’s invoices were paid twice monthly.

In 2014, the plaintiff, (who, unbeknownst to the company had allowed his law license to lapse), took a consulting position with the company.  In early 2016, however, another company began providing management services to US Shale and the plaintiff’s relationship with US Shale ended. Shortly after, he filed suit under the FLSA for unpaid overtime.

Although the district court found genuine disputes on whether the plaintiff was an employee, rather than an independent contractor, the court nonetheless entered a take-nothing judgment against the plaintiff. The district court found that he was exempt under the FLSA as a highly compensated professional. To qualify for that exemption, an employee must make at least $100,000 per year, paid on a salary or fess basis, and the employee must regularly and customarily perform one or more of the duties of a professional, executive, or administrative employee. Both requirements were met in this case. The plaintiff performed the duties of a learned professional by applying his specialized legal knowledge to perform services for the defendant, including reviewing contracts and providing counseling on other legal issues.  Additionally, of note, while licensed attorneys are one of only a few occupations that are not required to meet the salary basis requirements of the FLSA’s white collar overtime exemptions, the plaintiff’s law license was not active, which triggered the court’s need to consider the salary basis requirements of the FLSA’s overtime exemptions.

The Fifth Circuit affirmed the district court’s ruling. The Fifth Circuit explained that the attorney was exempt from the FLSA’s overtime requirements because the attorney’s $1,000 per day rate guaranteed him at least $455 per week. His pay was not subject to reduction based on variations in quantity or quality of work he performed, as required under the FLSA. Additionally, the plaintiff argued that the employer took improper deductions, which made the exemption inapplicable; he also testified that those reductions were the result of him invoicing the employer for something less than the rate of $1,000 per day, because he was a “nice guy” and didn’t want to bill a full amount for less than a full day. The court did not find these arguments persuasive.  Instead, the court reasoned that the company guaranteed the attorney would receive more than the $455 per week because “if [the attorney] worked for even one hour in a given week he was guaranteed $1,000, which exceeds the regulatory minimum of $455.”


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About Harrison Oldham

Harrison grew up in Mansfield, Texas. He attended Texas A&M University for his bachelor’s degree, where he met his wonderful wife, Kelsey. After graduating magna cum laude from Texas A&M, he attended SMU Dedman School of Law, graduating with honors in 2012. Today, Harrison and his wife live in Dallas, Texas with their son, Teddy.

Since graduating from SMU Law, Harrison has worked exclusively in the field of business law. He has spent time in private practice and in-house, working with clients of every size; from single person startups to Fortune 250 companies. Today his practice focuses on serving the diverse needs of businesses and individuals throughout Texas. You can learn more about Harrison by visiting his website, at: http://lonestarbusinesslaw.com/.

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