Originally posted on: https://www.employmentlit.com/2023/05/01/not-all-high-earners-are-exempt-from-overtime-pay/
By: Thevuni Athalage, Francine Foner, Esq. and Ty Hyderally, Esq.
You might think that employees who are highly compensated are never entitled to overtime pay. However, that is not always the case. Under the Fair Labor Standards Act (FLSA), 29 U.S.C. §201 et seq., eligible employees are entitled to overtime pay if they work more than 40 hours per week. Highly compensated employees (HCE) are exempt from overtime under the FLSA if: 1) They earn an annual compensation of $107,432 or more, including $648 per week on a salary or fee basis, 2) The employee’s primary duty includes performing office or non-manual work, and 3) The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt, executive, administrative or professional employee. 29 U.S.C. § § 213(a)(1) and 29 CFR 541.601.
Nonetheless, the Supreme Court recently ruled that an employee who was making more than $200,000 a year in annual wages was entitled to overtime pay. Helix Energy Solutions Group., Inc. v. Hewitt, 143 S. Ct. 677 (2023), Michael Hewitt (Hewitt) was hired by Helix Energy Solutions Group, Inc. (Helix) for a supervisory role at Helix’s oil rig. Hewitt generally worked 84 hours a week, 12 hours a day, and seven days a week. He would work this schedule for 28 days straight and then have 28 days off. Hewitt was paid at a daily rate, ranging from $963 to $1,341 a day, receiving a paycheck every two weeks. This amounted to over $200,000 annually. After being terminated from his job at Helix, Hewitt sued Helix, seeking overtime wages under the FLSA. Helix claimed that because Hewitt’s annual wages exceeded $107,432, he was considered as a HCE.
In its ruling, the Court emphasized the consistency, or lack thereof, of Hewitt’s wages. It did not matter that Hewitt received more than $200,000. Rather the issue was that he was being paid at a daily rate. Additionally, this rate was not a fixed amount and was instead a range. As the Court opined “salary” refers to the fixed amount that an employee receives “no matter how many days he has worked.” Id. at 686. Determining whether an employee was exempt from overtime pay required an analysis of the basis of payment, which “refers to the unit or method for calculating pay, not the frequency of its distribution.” Id. at 687.
The Supreme Court rejected Helix’s contention that Hewitt was exempt from overtime because he earned more than $107,432 annually, no matter how he was being paid. Rather, the Court found that regardless of the amount Hewitt earned, since he was not paid on a “salary basis” he was not exempt. As the Court observed:
Helix did not pay Hewitt on a salary basis as defined in §602(a). That section applies solely to employees paid by the week (or longer); it is not met when an employer pays an employee by the day, as Helix paid Hewitt. Daily-rate workers, of whatever income level, are paid on a salary basis only through the test set out in §604(b) (which, again, Helix’s payment scheme did not satisfy). Those conclusions follow from both the text and the structure of the regulations. And Helix’s various policy claims cannot justify departing from what the rules say.
Id. at 685.
In addition, the Court also stressed the negative consequences to employees that would result from Helix’s reasoning for classifying Hewitt as exempt from overtime. As the Court explained, there are many workers “paid less than $100,000 a year who would, if Helix prevailed, lose their entitlement to overtime compensation. Tr. of Oral Arg. 95-96. That consequence, unlike the ones Helix raises, is difficult, if not impossible, to reconcile with the FLSA’s design. Id. at 692.
This Supreme Court ruling empowers employees who earn more than $107,432 or more annually, but are paid by the day, to challenge their employer’s exempt classifications to avoid having to pay them overtime.
To read more about the FLSA’s guidance on Overtime Pay and Exceptions, click here: https://www.dol.gov/agencies/whd/fact-sheets/17h-overtime-highly-compensated. If you think your employer is violating your right to overtime pay, you may want to contact a Hyderally & Associates attorney today.
