The U.S. Supreme Court recently ruled that even a highly compensated employee could be eligible for overtime, provided that the employee is not paid on a salary basis.
In Helix Energy Solutions Group v. Hewitt, the court considered whether a supervisor making over $200,000 a year was entitled to overtime pay under the federal Fair Labor Standards Act (FLSA).
Helix argued that former employee Michael Hewitt was exempt from overtime pay because he was an “executive” and met the threshold for a “highly compensated” worker. Previously, the 5th U.S. Circuit Court of Appeals had determined that the compensation metric didn’t apply because Hewitt was compensated using a day rate, not a salary. At the time, six of the Fifth Circuit judges dissented, calling the ruling “incomprehensible.”
Given the level of dissent, it’s not surprising the case was elevated to the Supreme Court, experts have said. This time, the question at issue was specifically whether a “daily rate” pay satisfied the salary-based requirement under the FLSA.
The court observed that a salary provided “the stability and security of a regular weekly, monthly, or annual pay structure.” Even though Helix was paid biweekly, he was only paid for the days he worked, thus violating the principles of a true salary, the court said.
Justices Neil Gorsuch, Brett Kavanaugh, and Samuel Alito dissented.
The decision could impact employers who pay daily rates, particularly those in the oil and gas industry, and force them to restructure employee compensation plans. It also suggests a clear imperative for employers to maintain exemption standards that meet the strictest interpretation of exemption regulations. High compensation alone is not enough to meet the requirements.