SCOTUS Decision Shows that Highly-Compensated Employees Can Still Be Eligible for Overtime Pay

A recently decided case by the U.S. Supreme Court shows that even highly-compensated employees can be mislabeled as overtime-exempt under the Fair Labor Standards Act (FLSA). On February 22, 2023, the Supreme Court addressed this very matter in its decision in Helix Energy Solutions Group, Inc. v. Hewitt.

The Helix case involved a highly-paid employee who worked on an off-shore oil rig. The rig worker was paid a daily rate and was only paid for the days he worked. In total, his pay added to over $200,000.00 per year, without any overtime pay. The rig worker's duties included managing 12 to 14 employees.

The worker sued his employer under the FLSA, alleging unpaid overtime. In response, the employer argued that the worker was exempt from overtime under the highly-compensated employee exemption. Under this exemption, an employee is exempt from overtime pay if they earn at least $455 per week in salary (which is now $684 per week), earn overall pay of at least $100,000.00 per year (which is now $107,432), and have duties involving either managing the enterprise, supervising employees, or exercising authority to hire and fire. In Helix, there was no dispute that the rig worker earned more than $100,000.00 annually and that he supervised other employees. The only issue was whether his pay included a salary of at least $455 per week.

The Supreme Court held that the rig worker was not overtime-exempt because he was not paid a salary. In reaching its decision, the Court addressed two FLSA regulations. The first regulation the court addressed was 29 C.F.R § 541.602(a), which states that an employee is considered to be paid on a "salary basis" if the employee is paid a predetermined amount, weekly or less frequently, which is not reduced based on quantity or quality of work, and the employee receives full salary for any week in which they perform any work. Because the rig worker was paid a daily rate, not a weekly or less frequent rate, the Supreme Court held that he did not qualify as salaried under this regulation.

The second regulation the  Court addressed  was 29 C.F.R. § 541.604(b), which provides another method for determining whether an employee is salaried. This regulation allows daily-rate employees to qualify as salaried if the employer guarantees a salary of at least $455 per week, and the guaranteed amount is roughly equivalent to the amount that the employee usually earns per week. The Supreme Court held that the rig worker did not qualify as salaried under this regulation because he was not guaranteed a salary.

This case shows the difficulty for employers in determining whether an employee is overtime-exempt. Employers should always use care in designating employees and should consult with an attorney to ensure that their employees are properly designated as overtime-exempt or not.