As the United State Supreme Court recently made clear, it is important for employers to follow the regulatory guidelines and not assume that high pay automatically means no overtime. In an opinion issued on February 22, the Court held that an employee making over $200,000 a year on a daily-rate basis was entitled to overtime pay. See Helix Energy Sols. Grp., Inc. v. Hewitt, 143 S. Ct. 677, 678 (2023).

Michael Hewitt worked as a “tool pusher” for Helix Energy Solutions Group on an offshore oil rig. He typically worked 12 hours a day, seven days a week and was paid on a daily-rate basis with no overtime. Hewitt filed suit against Helix under the Fair Labor Standards Act, which guarantees overtime pay to certain employees who work more than 40 hours a week. The Court held that Hewitt was not a salaried employee and was therefore entitled to overtime.

Helix argued that Hewitt was exempt from the FLSA’s guarantee of overtime because he qualified as a “bona fide executive” under 29 U.S.C.§ 213(a)(1). There is a three-part test for determining whether an employee is a bona fide executive not entitled to overtime pay: 1) whether the employee receives a predetermined and fixed salary (the “salary basis” test); 2) whether the preset salary exceeds a specified amount (the “salary level” test); and 3) the nature of the employee’s job responsibilities (the “duties” test).

As the Court noted, separate and slightly different rules apply to employees depending on whether they make more or less than $100,000 in total annual compensation. Employees making less than $100,000 a year are considered to be executives when they: 1) are compensated on a salary basis; 2) at a rate not less than that set by 29 C.F.R. § 541.100(a)(1) for the location of their job; and 3) manage the enterprise, direct other employees, and exercise the power to hire and fire. For employees making more than $100,000 (highly compensated employees), the first two factors apply, but the duties test becomes easier to satisfy; highly compensated employees must regularly perform one of the three responsibilities listed in the general rule rather than all three.

Hewitt, who made more than $200,000 per year, was considered a highly compensated employee. The critical question for the Court was whether Hewitt was paid on a salary basis under 29 C.F.R. §541.602(a). Helix argued that, because Hewitt was paid every two weeks, and because that check always contained pay exceeding the salary level for any week where he had worked at all, he was a salaried employee. The Court, however, disagreed, finding that §602(a)’s use of the words “weekly basis” was not about paycheck frequency but the unit of time used to determine payment. The majority also noted that the salary basis and salary level requirements were different: the fact that Hewitt’s daily rate was higher than the weekly rate set forth by 29 C.F.R. §541.100 did not automatically mean he was paid on a salary basis because his pay still depended how many days he worked. While Hewitt’s rate was high, he was a daily-rate worker, not a salaried employee under §602(a).

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