On February 22, 2023, the U.S. Supreme Court affirmed a decision
from the Fifth Circuit Court of Appeals that an employee earning a daily rate
is not exempt from overtime pay under the Fair Labor Standards Act (“FLSA”).
See Helix Energy Sols. Grp., Inc. v. Hewitt, 143 S. Ct. 677 (2023).
In its 6-3 decision, the Supreme Court analyzed whether the employee fell
within the bona-fide executive exemption to the FLSA, and ultimately found he did
not because he was not paid on a salary basis.
See 29 U.S.C. § 213(a)(1).
Helix Energy Solutions Group (“Helix”) runs offshore oil
rigs, and Hewitt typically worked 84 hours each week on Helix’s rigs. Despite earning over $200,000.00 each year as
a supervisor, Hewitt was paid at a daily rate, and his paycheck reflected how
many days he worked in a two-week period.
Under the FLSA, employers claiming the bona-fide executive
exemption must satisfy 3 parts; (1) the “job duties” test, (2) the “salary level”
test, requiring payment of a preset salary above a set minimum threshold, and
(3) the “salary basis” test, which requires payment of a salary regardless of
the quantity or quality of the employee’s work.
The parties in Hewitt agreed the “salary level” and “job duties”
tests were satisfied, but disputed whether the “salary basis” test was met.
The Supreme Court explained the “salary basis” test is met when
the employee regularly receives a predetermined amount constituting all or part
of the employee’s compensation for any week in which he performs work
regardless of the number of days or hours he worked. At the time Hewitt was
employed by Helix, the predetermined amount was required to be at least $455 a
week regardless of the days worked. Because
Hewitt’s paycheck could be less than the minimum requirement depending on the number
of days he worked in a pay period, the Supreme Court determined his pay did not
fit the FLSA’s definition of a “salary basis.”
Justice Brett Kavanaugh was joined by Justice Samuel Alito
in one of two dissenting opinions.
Justice Kavanaugh explained he believed the “salary basis” test was
satisfied based on his interpretation that applicable regulations required a
predetermined amount on a “weekly or less frequent” basis that exceeds $455 per
week. Justice Kavanaugh rationalized that
because Hewitt’s day rate of $963 was higher than the weekly minimum, Hewitt was
guaranteed to fall within the requirements so long as he worked at least one
day a week.
The Supreme Court ruling in Hewitt further establishes that employees who are high earners are not automatically exempt from overtime wages, and that all parts of the test for exemption must be satisfied. If the tests are not met, overtime wages must be paid in order to be compliant with the FLSA.
