News & Insights

Supreme Court Rules Employees Paid Daily Rate Are Entitled To Overtime

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.