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The Employer Handbook Blog
The $101K Lesson: A Salary Alone Doesn’t Buy You an Exemption
Paying employees a flat weekly salary doesn’t make them exempt from overtime. One employer just learned that lesson the expensive way—after misclassifying dozens of workers.
TL;DR: A Houston plumbing contractor paid 31 service technicians and apprentice helpers a salary and didn’t pay them overtime. But those workers didn’t qualify as exempt under the Fair Labor Standards Act. The Department of Labor recovered over $100K in back wages and damages. A salary alone doesn’t make someone exempt—even highly compensated employees must meet the duties test.
Salaried Workers, But No Overtime—and Now a Six-Figure Settlement
According to a Department of Labor press release, the Wage and Hour Division found that a Houston-area plumbing contractor paid its service technicians and apprentice helpers a salary but failed to pay them the legally required overtime premium for hours worked over 40 in a workweek.
The Fair Labor Standards Act (FLSA) requires most employers to pay time-and-a-half for overtime hours. And it doesn’t make exceptions just because an employee is salaried.
In total, the DOL recovered:
- $50,845 in back wages, and
- $50,845 in liquidated damages
That’s $101,690 owed to 31 misclassified employees.
Being on Salary Isn’t the End of the Analysis—It’s Just the Beginning
To treat employees as exempt from overtime under the FLSA, an employer must prove two things:
- The employee earns at least $684 per week on a salary basis; and
- The employee performs exempt duties—typically executive, administrative, or professional work.
The second part—the duties test—is where most employers get tripped up.
Even under the Highly Compensated Employee (HCE) exemption—which applies to employees making at least $107,432 annually—there’s still a duties requirement. The employee must perform at least one exempt duty. A big paycheck doesn’t buy an exemption.
And here’s the kicker: skilled trades and manual labor jobs are almost never exempt. That includes roles like service technicians and helpers. The DOL has consistently taken the position that these employees are covered by the FLSA’s overtime protections, regardless of how they’re paid.
If Your Payroll Logic Starts and Ends With “They’re on Salary”… You’ve Missed the Point
This case is a reminder that:
- Salary ≠ exempt. The duties test always applies.
- Misclassification is expensive. One mistake across a group of employees can snowball quickly.
- Wage-and-hour audits are cheaper than settlements. Especially when you’re dealing with job classifications across entire departments or teams.
Final thought:
If your only exemption test is “We pay them a salary,” don’t wait for a complaint to find out you’re wrong. Check the duties—it’s cheaper than explaining it to an investigator.