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Supreme Court Case on Highly Compensated Employees Will Test Limits of FLSA Salary Test

    Client Alerts
  • November 18, 2022

Last month, the U.S. Supreme Court heard oral arguments in a case that may determine whether employers can claim the overtime exemption under the Fair Labor Standards Act (FLSA) for highly compensated workers who are not paid on a traditional weekly or annual salary basis. In Helix Energy Solutions Group v. Hewitt, the plaintiff was a manager who worked on an off-shore oil rig, making over $200,000 a year. Instead of a weekly salary, he was paid a daily rate while he was on the rig. The employer classified him as exempt from overtime pay under the FLSA based upon the abbreviated test for highly compensated executive employees.

The plaintiff sued for alleged unpaid overtime, claiming that he did not qualify for the executive exemption because he was not paid on a salary basis. The company argued that the guaranteed daily wage qualifies as a salary payment under the FLSA. At oral arguments, the justices appeared divided between those who read the salary requirement to require guaranteed weekly pay, and those who noted that the plaintiff appeared to meet the commonsense definition of a highly compensated executive.

The results of this case may have implications for a number of industries where shift or daily pay is common, even for highly paid employees. For example, some healthcare employers pay highly compensated nursing staff on a daily or shift basis. A decision in favor of the plaintiff could require those employers to restructure employee pay to avoid expensive overtime liabilities.