Supreme Court Finds Highly Compensated Employees Still Entitled to Overtime

Author: Michael Cardman, HR & Compliance Center Senior Legal Editor

February 22, 2023

Even if they are guaranteed well more than the weekly minimum pay for overtime-exempt workers, employees still are entitled to overtime if they are paid by the day instead of on a salary basis, the Supreme Court ruled today.

The high court's 6-3 decision in Helix Energy Solutions Group, Inc. v. Hewitt affirms the longstanding position of the US Department of Labor (DOL) that daily-rate pay does not satisfy the salary basis requirement of the Fair Labor Standards Act (FLSA) overtime exemptions.

The plaintiff in the Helix case earned more than $200,000 a year and acknowledged that he performed the duties of an overtime-exempt executive employee by supervising a dozen or more workers. He also was guaranteed at least $963 in any week in which he worked even a single minute.

Therefore, his employer argued, he should have been exempt from the FLSA's overtime requirements under the streamlined test for highly compensated employees, which allows employers to avoid paying overtime to employees if they:

  • Customarily and regularly perform only one of the exempt duties; and
  • Have a total annual compensation of at least $107,432, including at least $684 per week paid on a salary basis.

The critical question, then, according to the court, was whether the employer paid the plaintiff on a salary basis under 29 CFR 541.602.

Justice Elana Kagan wrote: "The answer is no." That regulation applies only to employees paid by the week (or longer); it is not met when an employer pays an employee by the day, as the employer did in the Helix case.

The court noted that daily-rate workers, of whatever income level, may be considered to be paid on a salary basis (and therefore be overtime-exempt) if they meet a test known as minimum guaranteed pay plus extras. However, the payment scheme of the employer in Helix did not satisfy this test because it did not guarantee that the employee would receive a weekly amount bearing a "reasonable relationship" to the weekly amount he usually earned.