On June 12, 2026, the Fifth Circuit issued its decision in Guilbeau v. Schlumberger Technology Corporation, No. 25-50594, holding that a hybrid compensation scheme combining a fixed biweekly salary with variable day rates qualified as “salary basis” pay under the FLSA, exempting the named plaintiff from overtime as a highly compensated employee (HCE).

Background

Schlumberger paid its Directional Drillers and Measurements While Drilling employees under a hybrid system: a fixed biweekly salary that did not vary with hours or days worked, plus variable day-rate pay for each day worked on a rig. The variable component often comprised the majority of an employee’s total compensation. The plaintiffs brought a collective action seeking overtime pay, arguing the day-rate component of their pay disqualified them from salaried exempt status. The district court denied Schlumberger’s motion for summary judgment, and the Fifth Circuit accepted interlocutory appeal.

The Court’s Analysis

The FLSA’s overtime exemption for HCEs requires, among other things, that the employee be paid on a “salary basis.” Two regulatory pathways exist. Under 29 C.F.R. § 541.602(a), an employee is salaried if he receives a predetermined amount each pay period on a weekly or longer basis that does not vary with work quantity or quality — with additional variable compensation permitted on top. Under 29 C.F.R. § 541.604(b), employees paid on an hourly or daily basis can still qualify as salaried, but only if a “reasonable relationship” exists between guaranteed and actual pay — a standard the Fifth Circuit has interpreted to require that actual earnings not exceed 1.5 times the guaranteed amount.

The critical question was which pathway applied. If Section 604(b) governed, the plaintiffs would win — their ratio of actual to guaranteed pay far exceeded the 1.5-to-1 ceiling. The court held, however, that Section 602(a) controlled because the guaranteed salary was a predetermined sum calculated on a biweekly basis and not derived from hours or days worked. The variable day rates were simply permissible “additional compensation” that did not disturb the salary basis classification. The court reaffirmed its earlier holding in Venable v. Smith International, 117 F.4th 295 (5th Cir. 2024), that the nature of the guaranteed pay — not the variable component — determines which regulatory pathway governs.

The court reversed and ordered summary judgment for Schlumberger on the named plaintiff’s claims, but remanded for further proceedings on the remaining collective members, whose individual job duties, compensation levels, and salary thresholds had not been fully developed in the record.

Practical Takeaways

For employers using hybrid pay structures, Guilbeau reinforces several important points:

  • A fixed salary meeting the weekly minimum establishes salary basis under Section 602(a) even where variable pay comprises the majority of actual compensation — provided the salary is truly predetermined and not derived from hours or days worked.
  • The cautionary counterpoint remains that where a guaranteed minimum that was simply a function of an hourly rate times hours was treated as hourly pay — not a salary — and subjected to the more demanding Section 604(b) reasonable relationship test.
  • Collective actions involving hybrid pay carry individual-inquiry risks. Even where the named plaintiff is exempt, other collective members may present individualized questions about duties and compensation that require separate analysis.

A copy of the Fifth Circuit’s opinion is available here.