Day-rate rules result in overtime pay for exempt highly compensated employee

The U.S. Supreme Court recently ruled that a daily-rate worker who earned over $200,000 annually wasn’t exempt from the Fair Labor Standards Act’s (FLSA) overtime requirements. In an opinion authored by Justice Elena Kagan, the Court held that compensation based on a daily rate didn’t satisfy the “salary basis test,” which is required for an employee to be exempt from overtime compensation. The decision, while specific to day-rate compensation, also applies to exempt employees paid an hourly or shift rate.

Facts

Michael Hewitt was an employee of Helix Energy Solutions Group who worked on an offshore oil rig as a tool pusher, a supervisory position classified as exempt from overtime compensation. He typically worked a 28-day “hitch” (consisting of 28 days on, followed by 28 days off work). During the relevant time, he was compensated at a day rate that ranged from $963 to $1,341, and his weekly compensation was based on the number of days he worked. Under the compensation scheme, he earned over $200,000 annually.

After Helix terminated Hewitt’s employment, he filed suit under the FLSA, asserting he was entitled to overtime because he didn’t meet the “salary basis” test required for the FLSA’s overtime exemptions. He argued that because his weekly compensation wasn’t a guaranteed, predetermined amount and could vary depending on the number of days he worked in a workweek, his compensation scheme didn’t satisfy the salary basis test. The Court agreed.

Highly compensated employees still must meet salary basis test