Hughes v. Gulf Interstate Field Services, Inc.
878 F.3d 183
| 6th Cir. | 2017Background
- Plaintiffs Tom Hughes and Desmond McDonald worked as welding inspectors for Gulf Interstate on a 2013–2014 Ohio pipeline project and brought FLSA and Ohio wage-act claims for unpaid overtime.
- Offer letters and rate sheets described pay as a daily rate of $337.00 "per day worked," and project materials stated inspectors were "paid for days worked only," though some testimony indicated a practice of paying for six 10-hour days per week.
- During their employment both earned high annualized compensation (Hughes ~ $109,000; McDonald ~ $83,000 for part-year) and were paid consistently in a manner that equated to at least six 10-hour days per week (including some holiday and sick-day payments).
- Gulf Interstate moved for summary judgment invoking the FLSA "highly compensated employee" exemption; the district court granted summary judgment for the employer based on actual payment levels.
- The Sixth Circuit reversed, holding that whether pay was a guaranteed weekly salary (salary-basis) is material where pay appears to be calculated daily, creating a genuine fact dispute precluding summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the salary-basis test requires a guaranteed minimum weekly salary when pay is computed daily | Hughes/McDonald: The regulations require an "employment arrangement" guarantee (or equivalent) — so whether pay was guaranteed matters and must be decided | Gulf Interstate: The fact plaintiffs "regularly receive" at least the required amount controls; actual payment suffices without a separate guarantee inquiry | Held: Guarantee matters when pay is computed daily; §541.602(a) and §541.604(b) indicate a guarantee (or non-reducibility) is legally significant |
| Whether §541.604(b) is applicable or necessary to assess exemption | Plaintiffs: §541.604(b) retains "employment arrangement" language and explicitly requires a guarantee when computing pay daily/hourly/shift | Defendant: §541.604(b) need not be considered where §541.602(a) ‘‘regularly receives" is met by actual payments | Held: §541.604(b) is relevant in cases (like this) where pay is arguably daily and guarantee is disputed; sister-circuit cases declining §541.604(b) involved undisputed guarantees |
| Whether consistent historical payments defeat plaintiffs' claim that no guarantee existed | Plaintiffs: Consistent payments do not prove a contractual guarantee; they may be gratuities or discretionary short-term practices | Defendant: Regular payment at qualifying levels shows plaintiffs were paid on a salary basis and exempt | Held: Actual consistent payments alone are insufficient on summary judgment to prove a guarantee when written terms and other evidence suggest day-rate or discretionary pay |
| Whether summary judgment was appropriate | Plaintiffs: There is a genuine dispute of material fact about whether plaintiffs had a guaranteed weekly salary | Defendant: No dispute—plaintiffs were actually paid the requisite amounts, so exemption established as a matter of law | Held: Reversed district court; genuine factual dispute about existence of a guarantee precludes summary judgment for employer |
Key Cases Cited
- Arnold v. Ben Kanowsky, Inc., 361 U.S. 388 (Sup. Ct. 1960) (exemptions narrowly construed against employers)
- Orton v. Johnny's Lunch Franchise, LLC, 668 F.3d 843 (6th Cir. 2012) (salary-basis inquiry focused on what employee actually received where base salary was clearly guaranteed)
- Anani v. CVS Rx Servs., Inc., 730 F.3d 146 (2d Cir. 2013) (guaranteed weekly salary dispenses with §541.604(b) where guarantee is undisputed)
- Litz v. Saint Consulting Grp., Inc., 772 F.3d 1 (1st Cir. 2014) (guaranteed minimum weekly pay established exemption where guarantee in compensation plan was clear)
- Douglas v. Argo-Tech Corp., 113 F.3d 67 (6th Cir. 1997) (an employee is salaried where compensation includes a guaranteed predetermined amount plus additional pay)