U.S. Supreme Court Rules Highly Compensated Daily Rate Employees Are Entitled to Overtime Pay

On February 22, 2023, in Helix Energy Solutions Group Inc. et al v. Hewitt, the United States Supreme Court issued a ruling that examined “whether a high-earning employee is compensated on a ‘salary basis’ when his paycheck is based solely on a daily rate – so that he receives a certain amount if he works one day in a week, twice as much for two days, three times as much for three, and so on.”

In a majority opinion written by Justice Elena Kagan, the Court ruled that “such an employee is not paid on a salary basis, and thus is entitled to overtime pay.”

Facts of the Case

Oil rig worker Michael Hewitt (Hewitt) brought suit against his employer, Helix Energy Solutions Group Inc. (Helix), contending that Helix misclassified him as “exempt” from earning overtime by wrongfully utilizing the Fair Labor Standards Act’s (FLSA) “highly compensated employee” exemption. While Helix argued that Hewitt, who was paid on a salary basis, qualified for the exemption, Hewitt’s suit opposed this classification on the basis that Hewitt was actually paid by the day, and thus, he did not qualify as a salaried employee exempt from earning overtime.

Under the FLSA “highly-compensated employee” exemption, an employee is deemed exempt from earning overtime if:

1. The employee earns total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary or fee basis;
2. The employee’s primary duty includes performing office or non-manual work; and
3. The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.

Here, Helix argued that Hewitt qualified for this exemption, and thus, argued they did not have to pay Hewitt overtime, because 1) he was paid $963 per day, and thus, at least $684 per week salary, and 2) that his job duties qualified him as an executive employee. 

Hewitt argued that because Helix paid him by the day, he did not actually earn a salary. 

The Supreme Court’s Decision 

In a 6-3 majority opinion, the Supreme Court rejected Helix’s arguments, finding that Helix could not misclassify Hewitt and other similarly paid daily-rate employees by arguing that they were paid on a salary basis, and thus exempt from overtime. The Court found that Helix’s policy violated the FLSA protections in that an employee must either be paid a true salary, or overtime. 

The Court warned that “Helix’s own position … would produce troubling outcomes – because it would deny overtime pay even to daily-rate employees making far less money than Hewitt.”

Championing Workers’ Rights

Sommers Schwartz believes that everyone should be paid what they’re owed for honest work.  When employers violate minimum wage laws, deny overtime pay, fail to compensate employees for off the clock work, or engage in other forms of wage abuse, we fight for employees’ rights – to the U.S Supreme Court, if necessary. If you’ve been a victim of wage theft, contact us today for a free consultation.