By: Tiffany R. Allen, Esquire
Published on: Mon 13th Mar, 2023 By: Campbell Durrant, P.C.
On February 22, 2023, the Supreme Court affirmed the decision of the Fifth Circuit and held that a highly paid per diem employee was entitled to overtime compensation due to the employer’s daily pay arrangement. In Helix Energy Sols. Group, Inc. v. Hewitt, 2023 U.S. LEXIS 944 (Feb. 22, 2023), the Supreme Court analyzed the Fair Labor Standards Act (“FLSA”) requirements for overtime pay, and the “white collar” exemptions that generally exempt certain employees from earning overtime compensation.
Under the FLSA, employers are required to compensate employees for all hours worked up to 40 hours per week. Employees who work more than 40 hours per week are entitled to overtime compensation at a rate commonly known as “time-and-a-half”. An exception to this requirement exists for employees who fall under either the administrative, executive, or professional employee exemption. An exemption applies if the employer can show 1) that the employee is paid on a “salary basis”; 2) the employee is paid at least $684 per week; and 3) the employee’s primary duty falls within the requirements of an exempt category. An exception also exists for highly compensated employees who are paid on a “salary basis” and earn at least $107,432 per year.
In Helix, the employee, Michael Hewitt, worked on an oil rig and generally worked 12-hours per day, seven days per week, for 28-days followed by 28 days off. His daily rate ranged from $963 to $1,341 and he was paid more than $200,000 per year. Despite Hewitt’s high earnings, and the employer’s argument that he was a salaried employee, the Court explained that employees paid a daily rate do not satisfy the “salary basis” test which requires employers to pay exempt employees “a predetermined amount on a weekly, or less frequent, basis”. The Court held that Hewitt’s daily pay did not fall within the “salary basis” definition, therefore, he was not a salaried exempt employee despite his high earnings.
The Supreme Court’s recent ruling, and the nuances of the exemptions under the FLSA, should be considered by employers when setting pay structures. In light of the Supreme Court’s decision, employers should take the time to review is pay arrangements to ensure compliance with the FLSA. Should you have any questions about the Supreme Court’s decision, the FLSA, or any other issue, the attorneys at Campbell Durrant, P.C. are available to assist you.
Takeaways:
• Employees who work more than 40 hours per week are entitled to overtime compensation unless an exemption applies.
• An exception to this requirement exists for employees who fall under either the administrative, executive, or professional employee exemption.
• An exception also exists for highly compensated employees who are paid on a “salary basis” and earn at least $107,432 per year.
• The Supreme Court has held that highly compensated employees who are paid a daily rate are not exempt from earning overtime compensation because they are not paid a “predetermined amount on a weekly, or less frequent, basis” as required under the salary basis test.
Bottom line:
The Supreme Court’s recent holding that highly paid per diem employees may not be exempt from the overtime requirements of the FLSA will now require employers to review its pay structure to ensure compliance with the FLSA.
