Introduction

In Wells v. Lottery.com, No. 25-50037 (5th Cir. Aug. 6, 2025), the United States Court of Appeals for the Fifth Circuit addressed whether a highly-compensated technology executive who stopped receiving his salary after his employer’s financial collapse could still be deemed an “exempt” employee under the Fair Labor Standards Act (FLSA) at the pleadings stage.

Carl Wells, former Vice President of Information Technology at Lottery.com, alleged that after July 2022 the company failed to pay him any wages—let alone the statutorily mandated minimum wage of $7.25 per hour. He sued for minimum-wage violations and various state-law claims. The district court dismissed the federal claim, ruling that (i) Wells had not plausibly pleaded a minimum-wage violation and (ii) even if he had, he was exempt under the FLSA. The Fifth Circuit affirmed, but on a refined basis:

1. Wells had stated a plausible minimum-wage claim;
2. however, his own complaint demonstrated that he fit squarely within the regulatory “highly-compensated employee” (HCE) administrative exemption; and
3. a failure to pay promised salary does not vitiate the exemption once the threshold compensation and duty elements are established on the face of the pleadings.

Summary of the Judgment

The panel (Judges Stewart, Clement and Wilson, per curiam) conducted a de novo review of the Rule 12(b)(6) dismissal:

• Pleadings Standard. Taking the facts in the light most favorable to Wells, his complaint sufficiently alleged that Lottery.com paid him nothing after July 2022, which, if true, would constitute a violation of 29 U.S.C. § 206(a).
• Affirmative Defense on the Face of the Complaint. A motion to dismiss may be granted when an affirmative defense is apparent from the pleadings. Here, the HCE exemption (§ 213(a)(1); 29 C.F.R. § 541.601) was evident because Wells:
  • earned well above the $151,164 annual threshold (he made $250,000);
  • performed quintessential administrative, managerial, and strategic IT duties; and
  • worked in a non-manual, office environment.
• No “Forfeiture” of Exemption. The court rejected Wells’s novel argument that failure to receive paychecks after July 2022 “revoked” his exemption—citing an absence of supporting authority and stressing that the exemption attaches to the nature of the employment relationship and agreed-upon compensation level, not the employer’s subsequent insolvency.

The result: the dismissal was affirmed, and the state-law claims remained with the Texas courts.

Analysis

1. Precedents Cited

• Ashcroft v. Iqbal, 556 U.S. 662 (2009) & Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007): Articulated the plausibility standard for pleadings. The court employed these to find Wells did plead a minimum-wage claim.
• Smith v. Ochsner Health Sys., 956 F.3d 681 (5th Cir. 2020): Explained the HCE exemption framework. It provided the doctrinal scaffold for finding Wells exempt despite minimal discussion by the district court.
• Carbon Six Barrels v. Proof Research, 83 F.4th 320 (5th Cir. 2023) & Kelly v. Nichamoff, 868 F.3d 371 (5th Cir. 2017): Allowed Rule 12(b)(6) dismissal when an affirmative defense is clear on the face of the complaint.
• Arnold v. Ben Kanowsky, Inc., 361 U.S. 388 (1960) (narrow construction of exemptions) & Corning Glass Works v. Brennan, 417 U.S. 188 (1974) (employer’s burden). Although cited, they yielded to the complaint’s undisputed factual allegations satisfying each element of the exemption.
• District-court case Barone v. Inspire Summits LLC (E.D.N.Y. 2022) was distinguished on its facts, illustrating the court’s careful precedent parsing.

2. Legal Reasoning

The panel’s reasoning unfolded in three logical steps:

1. Plaintiff’s Success on the Minimum-Wage Pleading Question. The court disagreed with the district judge’s characterization that Wells merely sought contractual wages, reading the complaint as alleging non-payment at all—squarely a § 206 claim.
2. Affirmative Defense Apparent. Despite narrow construction of exemptions, a court may dismiss when the exemption “leaps off the page.” Wells’s own allegations—$250,000 salary, vice-presidential title, strategic IT duties—met every HCE element (Smith).
3. No Pay-Equals-No-Exemption Argument. The FLSA regulations tie the HCE exemption to the employee’s “annual compensation level,” i.e., what the employee is entitled to receive. The panel refused to read in a forfeiture rule triggered by temporary non-payment, noting:
   • Lack of statutory or regulatory text supporting forfeiture.
   • Absence of Fifth Circuit or sister-circuit precedent.
   • The policy rationale that exemptions define coverage ab initio; subsequent breach of contract creates other remedies but does not retroactively rewrite FLSA status.

3. Impact

The decision carries several forward-looking consequences:

• Pleading-Stage HCE Determinations. Employers in the Fifth Circuit can raise the HCE exemption on a motion to dismiss whenever the complaint acknowledges salary and duties satisfying 29 C.F.R. § 541.601.
• No “Salary-Loss” Loophole. Plaintiffs cannot avoid an otherwise applicable exemption by alleging that the employer subsequently withheld pay. Breach-of-contract and state-wage remedies remain, but the FLSA’s minimum-wage provisions will not supply a federal foothold.
• Forum-Shopping Curtailment. The ruling discourages attaching nominal FLSA claims merely to secure federal jurisdiction when the factual narrative shows executive-level status.
• Judicial Efficiency. By confirming that clearly established exemptions may be resolved on the pleadings, the Fifth Circuit promotes early dismissal of inapplicable FLSA claims, conserving judicial resources.

Complex Concepts Simplified

• FLSA Minimum Wage (29 U.S.C. § 206). Requires covered employers to pay at least $7.25/hour to non-exempt employees.
• Exempt vs. Non-Exempt. “Exempt” employees fall outside the FLSA’s wage-and-hour protections. Common exemptions: executive, administrative, professional, outside-sales, computer professional, and HCE.
• Highly-Compensated Employee (HCE) Exemption (29 C.F.R. § 541.601).
  1. Total annual compensation meets or exceeds a regulatory threshold ($151,164 as of 2025).
  2. The employee’s primary duty is non-manual office work.
  3. The employee customarily and regularly performs any one of the exempt duties of an executive, administrative, or professional employee (e.g., managing a department, exercising discretion).
• Rule 12(b)(6) Dismissal on Affirmative Defense. Normally affirmative defenses await summary judgment, but dismissal is proper when the defense is apparent from the complaint itself (e.g., statute of limitations, absolute immunity, or—as here—statutory exemption).
• Forfeiture Theory Rejected. Some plaintiffs argue that if an employer misses paychecks the exemption “vanishes.” The Fifth Circuit clarified that entitlement, not receipt, governs.

Conclusion

Wells v. Lottery.com cements two critical teachings for FLSA litigation in the Fifth Circuit:

1. Even the most senior executive can assert a minimum-wage claim, but it will survive only if no exemption plainly applies.
2. The highly-compensated employee exemption hinges on contracted-for compensation and duties, not on whether the cash ever lands in the employee’s bank account.

By allowing dismissal where the exemption is “self-pleaded,” the court protects the intended scope of the FLSA while steering mis-pleaded wage disputes toward appropriate state-law avenues. This precedent will likely resonate well beyond technology startups in distress, influencing any scenario where executives claim FLSA coverage after their salaries evaporate.