The U.S. Supreme Court has reached a decision in the case of a highly compensated employee who sued his employer for unpaid overtime.
In Helix Energy Solutions Group Inc. v. Hewitt, the court said that although the employee earned more than $200K per year, that didn’t necessarily mean he was exempt from the overtime requirements of the Fair Labor Standards Act (FLSA).
The court focused on one of the standards that employers must meet if they’re going to classify any employees as exempt: paying them on a salary basis.
Here’s what the Supreme Court of the United States (SCOTUS) said on February 22, 2023:
No guarantee
The employee who brought the FLSA lawsuit worked on board an offshore oil rig, overseeing various aspects of its operations. He also supervised 12 to 14 workers.
Although he sometimes put in 84 hours per week, he didn’t receive any overtime pay. After all, he was an executive, exempt from overtime – that was the company’s point of view.
Earning $963 per day? That’s highly compensated by most people’s standards. But dollar amount alone isn’t enough when it comes to the FLSA regulations on exemptions.
Let’s say the company had paid him that daily rate and then, along with that, guaranteed that he’d earn a weekly payment approximating what he usually earned. Under that type of situation, described in 29 CFR Sec. 541.604(b), the salary basis requirements could possibly be met.
But those weren’t the circumstances in Hewitt. The employee wasn’t paid on days he didn’t work.
When someone is paid on a daily basis, that person’s weekly pay is a function of how many days he or she worked that week – and that’s not paying someone on a salary basis, the court made clear.
Who’s exempt from overtime
If you think employees at your company qualify for the executive exemption, consider two rules, which were broken down in the SCOTUS decision. They are the:
- general rule – requiring the employee to pass the salary basis test, the salary level test (currently that’s $684 per week) and the duties test, and
- highly compensated employee rule – requiring the employee to pass the salary basis test, the salary level test (currently that’s $107,432 per year) and a relaxed duties test.
Under either rule, an employer has to pay an employee on a salary basis – i.e., a predetermined and fixed salary that doesn’t vary with the amount of time worked.
