As has been widely publicized, the U.S. Supreme Court announced in Helix Energy Solutions Group, Inc. v. Hewitt, No. 21-984, that a former employee was entitled to overtime pay under the Fair Labor Standards Act (“FLSA”), despite working as a manager and earning over $200,000 annually.
Hewitt worked for Helix on an offshore oil rig, overseeing various operations and supervising 12-14 other employees. He would typically work 28 days on the vessel and then have 28 days off the vessel before reporting for his next “hitch.” While on vessel, he worked an average of 84 hours per week. He was paid on a daily-rate basis with no overtime compensation. His daily rate ranged from $963 to $1,341 per day and he received a paycheck every two weeks totaling his daily rate times the number of days he had worked during the pay period. While his actual paycheck was never less than $963 (if only one day was worked) and could be as high as $13,482 (if he worked all 14 days of the pay period), he was not per se guaranteed a minimum amount for any week. Under this compensation scheme, Hewitt earned more than $200,000 annually.
Helix argued that Hewitt was not owed overtime because he was exempt as a “highly compensated” employee. Employees making more than $107,432 per year are considered to be “highly compensated employees” and exempt from overtime pay requirements if, (1) the employee is paid on a salary or fee basis; (2) is paid at least $684 per week; and (3) the employee’s primary duty includes performing office or non-manual work, and the employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.
In Helix, it was undisputed that Hewitt met the salary level test and the job duties test. Thus, the only question for the Court to address was whether Hewitt – who was paid on a daily rate metric – met the “salary basis test” of the FLSA. The Court concluded that he did not because the plain text of the FLSA excludes daily-rate workers. The Court explained that the common understanding of “salary” means the “stability and security of a regular, weekly, monthly, or annual pay structure.” Thus, Hewitt – who did not have a stable paycheck amount, including no guaranteed minimum weekly rate – was not “salaried” and thus, not exempt.
In a summary that must have been particularly painful for Helix, the Court highlighted simple alternative compensation schemes that would have brought Helix into compliance with the salary basis test, including: (1) Helix could add a weekly guaranteed amount of pay to work in conjunction with Hewitt’s daily pay rate, so that Hewitt would be paid the minimum threshold amount regardless of the amount of hours/days/shifts worked, or (2) Helix could convert Hewitt’s compensation to a straight weekly salary for the time spent on the rig.
Helix emphasizes the importance of checking all the boxes when it comes to classifying employees as exempt and not paying overtime. Employers must ensure that exempt employees meet all the requirements of at least one exemption. Failure to do so can be costly. And employers should not assume that highly compensated employees won’t ask for more. An overtime lawsuit by a manager paid more than $200,000 per year seems improbable if not impossible, but Helix should serve as a reminder to all employers that you can never be too careful.
In light of Helix, employers should also routinely review their classifications for all employees classified as exempt to ensure that every element of the exemptions are met. BurnsBarton has helped many clients complete FLSA audits to ensure compliance. If you have questions or need assistance with your FLSA classifications, please contact Alexandra Miller at email@example.com, or your favorite BurnsBarton attorney.