Highly Compensated Employee Files FLSA Lawsuit: Here’s Why

Having trouble deciding whether an employee is exempt under the Fair Labor Standards Act (FLSA)? A ruling from a federal appeals court in a case from Texas provides some help.

The court ruled that a highly compensated employee — a vice president of information technology — was exempt under the statute.

Employee Was a Highly Compensated VP

In March of 2022, Carl Wells started working for Lottery.com as Vice President of IT. He signed an employment agreement that called for an annual salary of $250,000.

Wells said his job called for him to develop and implement all of the company’s IT strategies. He was also responsible for making sure that Lottery.com’s data and systems were secure and met all applicable industry standards. In addition, he managed its IT budget and its relationship with vendors.

In July of 2022, Lottery.com found itself in serious financial trouble, and it furloughed a number of employees. Wells was not among them, but he said the company encouraged him to incur tens of thousands of dollars in operational expenses on his own credit card — and gave him the impression that the money would be reimbursed.

He said that after the furlough, Lottery.com did not pay him his full wages or non-wage debts that it owed him. He sued, asserting a minimum wage violation claim under the FLSA.

District Court Rules for Employer

A federal district court granted a defense motion to dismiss. It decided that Wells did not plead an adequate minimum wage violation under the FLSA and that he was exempt under the statute. Wells filed an appeal.

The U.S. Court of Appeals for the Fifth Circuit (which covers Louisiana, Mississippi and Texas) upheld the lower court’s ruling for the employer.

First, the appeals court disagreed with the lower court’s finding that Wells did not plead a minimum wage violation under the law.

The lower court said he did not do so because he was not seeking to recover the statutorily mandated minimum hourly wage but instead was trying to get much more. But the appeals court said there was nothing stopping him from seeking to recover both FLSA minimum wages plus broader unpaid wages. For this reason, it said, Wells stated a plausible claim for relief under the law’s provision relating to minimum wages.

Good News, Bad News

Unfortunately for Wells, the appeals court nonetheless affirmed the ruling against him on the basis that he was an exempt employee under the law.

The FLSA exempts employees who are employed in a bona fide executive, administrative professional capacity, the appeals court explained. The administrative exemption applies if an employee’s primary duty is to perform office or non-manual work that is directly related to the management of general business operations, and the employee exercises discretion and independent judgment on important matters.

In addition, the FLSA includes an exemption for highly compensated employees. That exemption applies if annual compensation meets an applicable threshold, the employee regularly and customarily performs at least one of the exempt duties of an executive, administrative or professional employee, and performing office or non-manual work falls within their primary job duties.

Wells clearly fit within the latter exemption, the appeals court said.

Wells was highly compensated under the FLSA, the appeals court said, rejecting his argument that he lost his exempt status when the employer stopped paying him at his regular rate.

Employee was Exempt

Wells’ offer letter explicitly said he would serve in an exempt role, and his pleadings said he customarily performed office duties. His job clearly involved managing the employer’s IT operations, the appeals court found.

Because he customarily and regularly performed office or non-manual work that was directly related to his employer’s management or general business operations – and was highly compensated – he was exempt under the FLSA, the appeals court ruled.

The district court’s decision was affirmed.

Under the FLSA, employees can be classified as exempt or non-exempt based on their duties and salaries. Of course, misclassifying employees can easily lead to a legal headache.

This case is a quick and useful primer on the applicability of the FLSA’s highly compensated employee exemption. It also teaches that even highly compensated employees are not necessarily precluded from seeking relief under the FLSA’s minimum wage provision.

Wells v. Lottery.com, Inc., No. 25-50037 (5th Cir. 8/6/25).