It’s been six months since the U.S. Supreme Court issued its opinion affirming the necessity of real salary pay for high-earning workers, leading courts and employment law practitioners to refocus their attention on the mechanics of salary pay when analyzing overtime-exempt status.
The high court found that Helix Energy Solutions Group Inc. violated the Fair Labor Standards Act by classifying oil rig worker Michael Hewitt as an overtime-exempt executive but doling out his six-figure pay as a day rate instead of on a salary basis. …
Certain white collar workers are exempt from overtime if they perform specific duties and are paid on a salary basis, the latter defined as a guaranteed weekly amount that does not fluctuate based on the quality or quantity of work performed, according to Section 541.602(a) regulation.
Another tenant of salary pay under the FLSA's requirements is that the guaranteed weekly amount must meet a minimum threshold — currently $684.
A separate section of the federal code, Section 541.604(b), allows salaried professionals' pay to be calculated on a shift or day basis without compromising their exempt status if "the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis" and "a reasonable relationship exists between the guaranteed amount and the amount actually earned."
The key question before the Supreme Court was how the salary requirements interact with the highly compensated worker rule and a day rate pay scheme.
When Hewitt worked for Helix from 2014 to 2017, his pay of $963 to $1,341 per day far surpassed the required regulatory weekly minimum salary level, then $455. His over $200,000 pay was also above the total compensation threshold for the highly compensated worker rule, a subset of the white collar exemptions that has a relaxed duties test but requires a worker's total earnings to equal $100,000 then and now $107,432 now.
Despite checking those salary level boxes, the nitty-gritty details of how he was actually paid were enough to nix his exempt status and entitle him to overtime, according to the opinion.
Helix makes plain that a high day rate is not sufficient to meet the requirements of the highly compensated worker rule unless such a compensation scheme satisfies section 541.604(b), said Paul DeCamp, a member of management-side firm Epstein Becker & Green PC and a former administrator of the DOL's Wage and Hour Division.
"What Helix made clear is that the way the Supreme Court has chosen to read the regulations makes that type of arrangement not really tenable going forward in terms of sustaining the highly compensated exemption," he said. "That's the most basic takeaway from it."