At a glance
- In Helix Energy Solutions Group v. Hewitt, the Supreme Court held that an employee earning more than USD 200,000 a year was eligible for overtime pay because he was paid on a daily basis and not a salary basis under the Fair Labour Standards Act (FLSA).
In Helix, plaintiff filed an action against his employer seeking overtime pay under the FLSA, which guarantees overtime pay to covered employees when they work more than 40 hours a week. From 2014 to 2017, plaintiff worked for Helix on an offshore oil rig, typically working 84 hours a week. Plaintiff was paid on a daily-rate basis, with no overtime compensation, and earned over USD 200,000 annually.
Helix asserted that Hewitt was exempt from the FLSA’s overtime requirements because he was a “bona fide executive,” which requires that the employee satisfy three tests:
- That the employee is paid on a “salary basis” test;
- That the employee is paid over a certain salary threshold; and
- That the employee performs certain exempt duties.
There was no dispute that Hewitt satisfied the duties criteria and received more than the threshold amount; rather, the issue was whether Hewitt was paid on a “salary basis,” since he was paid a day rate.
Broadly, the Department of Labour has defined payment on a “salary basis” to mean that the employee receives for each pay period, on a weekly or less frequent basis, a guaranteed minimum amount constituting all or part of the employee’s compensation, which amount cannot be subject to reduction because of variations in the quality or quantity of work performed.
The District Court agreed that Hewitt was paid on a salary basis and thus was exempt; however, the Fifth Circuit reversed, holding that since Hewitt received a day rate and did not know the amount of his compensation for each weekly (or less frequent) pay period before he worked, he did not receive a predetermined, guaranteed amount and thus was not paid on a salary basis. On appeal, the Supreme Court affirmed, holding that Hewitt was not paid on a salary basis and that day rates are not a salary for the purposes of the FLSA. Accordingly, while Hewitt was highly paid, he was not exempt from the FLSA’s overtime pay guarantee.
Given the above, companies should be mindful that when utilising the FLSA exemptions, it is critical that employees are paid on a salary basis, even when they are highly compensated. At a high level, employers must be cognizant that employees receiving day rates (or similar pay methods which may fluctuate) will not, on their own, satisfy the FLSA’s salary basis requirement.
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