A reminder: Employees are entitled to overtime for work over 40 hours a week, unless an exemption applies. For so-called white collar workers, there are three main exemptions: administrative, professional and executive. Each of these categories looks at whether the employee had certain covered “duties” (known as the “duties” test) and a minimum guaranteed weekly salary (known as the “salary” test).
Under federal law (but not state law), there is also an exemption that allows employers to not pay overtime to “highly compensated” employees over $100,000 a year. These rules have been in place for nearly 10 years, but the regulations are far from clear.
The case comes down to a fairly arcane part of the federal regulations addressing whether a “reasonable relationship” exists between the guaranteed amount an employee is supposed to receive and the amount actually earned. The Second Circuit concludes that this section does not apply when workers make over $100,000 under the FLSA.
It’s a fairly straightforward conclusion because to apply that language to highly compensated workers would render the rest of the regulation pretty meaningless. Thus, a win for the employer.