Yesterday, in a significant decision, the United States Supreme Court held that highly-compensated employees can be eligible for overtime pay if they are paid on a daily basis.
In Helix Energy Solutions Group v. Hewitt, Helix Energy Solutions, an offshore oil and gas company based in Houston, claimed that its former employee, Michael Hewitt, was exempt from overtime pay because he was a highly-paid executive, earning more than $200,000 per year. As a result, Helix said, he did not qualify for overtime pay because he received at least $455 each week, meeting the minimum standard for salaried workers at the time.
Hewitt, however, claimed that he should get retroactive overtime because Helix calculated his pay using a daily rate. From 2015 through 2017, Hewitt worked 28-day “hitches,” meaning that he lived on an offshore oil rig for 28 days at a time and was on-duty for 12 hours each day. His pay ranged from $963 to $1,341 per day. Hewitt earned $248,053 in 2015 and $218,863 in 2016, according to court records.
Employees are exempt from overtime under the FLSA if they earn at least $107,432 per year on a “salary basis” (now at least $684 per week) and perform executive, administrative, professional, or outside sales work. The predetermined salary level cannot vary based on the quality or quantity of work. Employers may use nondiscretionary bonuses, incentive payments, and commissions to satisfy up to ten percent of the standard salary level.
The Court ultimately agreed with Hewitt, ruling that he was eligible for overtime pay because he was paid on a daily basis. The Court noted that the term “salary” “connotes a steady and predictable stream of pay,” and that “[t]he whole point of the salary-basis test is to preclude employers from paying workers neither a true salary nor overtime.” According to the Court, the salary basis requirement is met solely when employees are paid by the week or longer. “It is not met when an employer pays an employee by the day, as Helix was paid. The basis of payment “typically refers to the unit or method for calculating pay, not the frequency of its distribution.” Hypothetically, the Court indicated, Helix could meet the salary basis requirement by adding a weekly guarantee to the worker’s per-day rate or by converting the worker’s pay to a straight weekly salary for time he spends on the rig.
Ultimately, this case hinged on whether being paid at least a minimum amount per day can count as a salary. And the Court ruled that the company was not paying the company a salary as it is defined under the Fair Labor Standards Act (“FLSA”), and, therefore, this highly-compensated employee was not exempt.