If you work with employees, you’ve worked with the Fair Labor Standards Act (FLSA).  Whether it’s just the basics of understanding how the law applies, or utilizing it to create the optimal work week to avoid massive overtime payments, it is necessary for all employers to have a working understanding of the FLSA.

Under the FLSA, covered employees receive overtime pay, at one and a half times the employee’s regular rate of pay, for work performed beyond 40 hours a week.  There are limited exceptions, which include highly paid executives, administrators, and professionals, amongst others.  One exception that recently came under scrutiny by the U.S. Supreme Court is the salary exception for highly paid employees in Helix Energy Solutions Group, Inc. v. Hewitt.

Hewitt worked on an off-shore oil rig for an average of 84 hours per week from 2014 to 2017.  He was paid a daily rate for days on which he performed work on the rig, which amounted to over $200,000 a year in wages.  However, Hewitt was only paid for the days he worked on the rig, and his wages could vary based on the amount of work he performed.  In other words, his pay was not guaranteed.

After he was fired from his position as a “tool-pusher” on the rig, where he reported to the rig’s captain, and supervised 12 to 14 workers, Hewitt filed suit against Helix, claiming that he was entitled to overtime pay for all work performed over 40 hours in a week.  In response to his claim, Helix responded that Hewitt was exempt from overtime as he was a bona fide executive, based on his salary.  The District Court agreed, and Helix was granted summary judgment.

On appeal, the Fifth Circuit Court of Appeals reversed the judgment, holding that a daily rate employee did not fall within the protections of bona fide executive exception, as that only applies employees whose compensation is paid on a weekly or less frequent basis without regard to the number of days or hours worked.

In what seems like a clear case of non-salaried compensation, the Supreme Court granted certiorari to hear Helix’s appeal, which revolved around the question of whether Hewitt was paid on a salary basis under section 602(a) of the FLSA regulations.  In response to its own question, the Court stated quite bluntly, “The answer is no.”

Under 602(a) of the FLSA, an employee is paid on a salary basis if he “receives the full salary for any week in which he performs any work without regard to the number of days or hours worked.”  The Court determined that based on the fact he would be earning less if he were to work fewer than seven days in a week, he was not being paid on a salary basis.

In its argument, Helix stated that because Hewitt “received” pay exceeding $455 (the salary level) for any week he worked at all, that he was paid on a salary basis.  However, Helix could not get around the fact that its pay was issued based on the number of days worked, rather than based on the weeks that he worked.  The remainder of Helix’s arguments relied upon bending the regulations in order to accommodate Hewitt’s high pay rate, and making policy arguments against the idea of high earners receiving overtime, which the Court did away with in short order.

With that, Hewitt was determined to be a non-salaried worker eligible for overtime payments under the FLSA, and was allowed to proceed with his case seeking backpay for all hours worked over 40 in a week.

This should be a lesson for all employers – just because an employee is earning at a high rate does not ensure the employee is not eligible for overtime payments.  Each employer must evaluate both the employee’s duties as well as the employee’s pay structure to guarantee the employee is not entitled to overtime.  If you, or your organization, are in need of assistance with classifying your employees appropriately, contact Wiley Reber Law, for FLSA experience that works.