Supreme Court Clarifies That Even Highly Compensated Employees May Qualify for FLSA Overtime Pay

March 9, 2023

Last month, the United States Supreme Court issued a ruling in the matter of Helix Energy Solutions Group, Inc., Et al. v. Hewitt, a case that challenged the rules governing overtime pay and the classification of exempt employees under the Fair Labor Standards Act (FLSA).

Michael Hewitt was an employee of Helix Energy, working on an oil rig where he average 84 hours per week. Hewitt was paid between $936 and $1,341 per day. Claiming that Hewitt was an “exempt” employee subject to the FLSA’s “white-collar exemption,” and because Hewitt earned over $200,000 annually, Helix did not pay Hewitt for any overtime for the roughly 44 hours Hewitt worked each week above the 40 hour threshold.

Hewitt filed suit, claiming that he was misclassified as “exempt.” The Supreme Court agreed with him.

The Court held that a worker is not compensated on a “salary” basis, and therefore cannot qualify for the FLSA’s white-collar exemption, when such employee’s paycheck is based solely on a daily rate. For example, if an employee receives a certain pay rate for working one day in a week, twice as much for two days, three times as much for three, and so on, that employee is not considered “exempt” from the requirement to pay for overtime.

The Helix decision clarifies that employees receiving such “day rate pay” do not satisfy the salary basis exemption under the FLSA. Accordingly, such employees are entitled to overtime pay unless they qualify for some other exemption (like, for example, if the responsibilities of the employee are exclusively managerial in nature). Because of this ruling, even highly compensated employees may be eligible to receive overtime if they are paid solely on a day-rate basis.

The Helix decision reminds employers to be careful paying on a day-rate basis those employees they claim to be exempt. Employers should work closely with experienced employment counsel to ensure that their overall compensation arrangement is in compliance with the salary basis requirement as articulated in Helix.

The labor and employment attorneys at Gross Shuman P.C. work with businesses of all types across all industries to minimize their risk when it comes to employment law issues. If you have questions or concerns, please contact us.

The full ruling from the Supreme Court can be found here.

Attorney Kevin Burke counsels employers on recent developments in employment law, and the implementation of policies and procedures which enable employers to be in compliance with federal and state laws. He can be reached at 716-854-4300 ext. 292 or kburke@gross-shuman.com