The Supreme Court rules daily-rate employees are entitled to overtime compensation

In a case from February, the U.S. Supreme Court issued an important decision regarding whether highly compensated employees paid on a daily-rate basis were entitled to overtime compensation under the Fair Labor Standards Act (FLSA).

Background

Michael Hewitt worked on an offshore oil rig, and during the weeks he was on the rig, he often worked 84 hours a week. Helix Energy Solutions Group, Inc., paid him on a daily-rate basis with no overtime.

This means that Hewitt’s paycheck would amount to his daily rate times the number of days he worked in the pay period. He earned more than $200,000 per year.

The FLSA exemption rules

Helix argued that Hewitt was exempt from overtime because he was a “bona fide executive.” The three most common exemptions from overtime under the FLSA are what are commonly known as the “white-collar exemptions”: administrative, executive, and professional.

Under the FLSA, an employee is considered an exempt executive if the employee meets three distinctive tests: (1) the “salary basis” test, which requires an employee to be paid a predetermined and fixed salary that doesn’t vary with the amount of time worked; (2) the “salary level” test, which requires that the preset salary exceeds a specified minimum amount; and (3) the job “duties” test, which requires that the employee hold certain responsibilities.

The Department of Labor (DOL) has implemented two slightly different rules for the executive exemption. The general rule applies to employees making less than $100,000 per year.