Overtime Pay Compliance With The FLSA: Helix Energy Solutions Group, Inc. v. Hewitt And Highly Compensated Employees

• Published date: 04 April 2023
• Subject Matter: Employment and HR, Compliance, Employee Benefits & Compensation
• Law Firm: Schnader Harrison Segal & Lewis LLP
• Author: Mr Eric Garcia

It certainly is not news that the Fair Labor Standards Act ("FLSA") requires employers to pay employees overtime pay when they work more than 40 hours per week - absent any specifically enumerated exemptions.¹ Related thereto, employers are not required to pay overtime compensation to employees who work "in a bona fide executive, administrative, or professional capacity," as defined by the United States Department of Labor ("DOL"). Under the DOL's regulations, an employee must be paid on a "salary basis" to qualify for these exemptions.² Additional regulations expand on the salary-basis requirement, as applied to lower-income and higher-income employees.

On May 2, 2022, the Supreme Court granted certiorari on Helix Energy Solutions Group, Inc. v. Hewitt,³ a case about whether a tool-pusher on an oil-rig was wrongly denied overtime pay. At the heart of the case was the legal question of whether a high-earning employee is compensated on a "salary basis" when his paycheck is based on a daily rate rather than a weekly rate'meaning his compensation amount ranges weekly depending on how many days he works during a given week. On February 22, 2023, a 6-3 majority of the Supreme Court held that Hewett was not exempt from overtime pay because he was not paid on a salary basis.⁴

A Short FLSA Primer

Under DOL regulations, an employee may be considered a bona fide executive, and thus excluded from the FLSA's overtime pay requirement, if the employee meets three distinct tests: (1) the "salary basis" test, which requires that an employee receive a "predetermined amount" for each week the employee works "which is not subject to reduction because of variations in the quality or quantity of the work performed"; (2) the "salary level" test, which requires that the preset salary exceeds a specified amount; and (3) the "job duties" test, which focuses on the nature of the employee's job responsibilities.⁵ When all three criteria are met, the employee is considered a bona fide executive and excluded from the FLSA's overtime compensation requirement.

The Secretary of Labor has implemented the bona fide executive standard through two separate and slightly different rules, the first "general rule" applies to employees making less than $107,432 per year, and the second rule addresses "highly compensated employees" ("HCE"), who make at least $107,432 per year.⁶ Under the general rule, employees meet the executive exemption when they are (1) "compensated on a salary basis"...