The U.S. Supreme Court recently issued a 6-3 ruling in Helix Energy Solutions Group v. Hewitt. In its decision, the Court found that highly compensated employees were eligible for overtime pay if an employer paid them daily. Unless the employer pays an employee a salary as defined under the Fair Labor Standards Act (FLSA), even a highly compensated employee is not exempt from receiving overtime pay.
The Court’s decision should not impact most employers. In this very narrow ruling, the Court found that the employer’s day rate pay structure, which is rarely utilized outside the energy industry, did not equate to a salary under FLSA. Employers must meet the requirements of FLSA in classifying employees, as misclassification can be costly.
Helix Energy Solutions Group is an offshore oil and gas company based in Houston, Texas. The company claimed that Michael Hewitt, its former employee, was exempt from overtime pay under FLSA because he was a highly paid executive making over $200,000 annually. According to the company’s reasoning, Hewitt did not qualify for overtime pay because he made a minimum salary of $455 per week, the minimum standard for salaried workers under FLSA at that time.
Hewitt claimed that he should receive retroactive overtime pay under FLSA because Helix calculated his pay based on a daily rate. More specifically, from 2015 to 2017, Hewitt worked 28-day “hitches” living on an offshore oil rig, working 12 hours each day. His pay during those hitches ranged from $963 to $1,341 daily.
The Court reasoned that an employer’s pay meets the definition of salary under FLSA only when it pays its employees by the week or longer, not by the day. The basis of payment is not measurable by the frequency of payment but by the method for calculating pay.
Under current standards, employees are exempt from overtime pay under FLSA if they earn at least $107,432 per year in salary, or at least $684 per week, and work in a role that meets one of the following definitions:
- An executive employee who manages the business, directs the work of at least two full-time employees, and has the authority to hire or fire other employees, although a highly compensated employee only must meet one of these three criteria to qualify as an executive employee;
- An administrative employee who performs office or nonmanual work directly related to management or general business operations and who may exercise discretion and independent judgment with respect to matters of significance;
- A professional employee who does work requiring advanced knowledge in a field of science or learning, usually acquired by a prolonged course of specialized intellectual instruction, is predominantly intellectual in character and includes exercising discretion and judgment;
- A creative professional employee who primarily does work that requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor; or
- An employee who engages in outside sales work.
The salary level may not vary according to the quality or quantity of the work. Employers may use nondiscretionary bonuses, incentives, and commissions to constitute up to ten percent of the total salary.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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