Client Advisory: SCOTUS on Salaried Employees and Overtime Pay

March 3, 2023


By: Evelyn A. Haralampu, Partner

In Helix Energy Solutions Group, Inc. v. Hewitt, a 6-3 decision issued on February 22, 2023, the United States Supreme Court decided what “salary” means for purposes of applying the regulations exempting highly compensated employees from the overtime pay requirements under the Fair Labor Standards Act (FLSA). 

Hewitt, an employee with supervisory duties, had a guaranteed daily pay of $983 no matter how long he worked and was paid over $200,000 annually. His employer denied him overtime based on the executive exemption under federal regulations. The narrow question before the Court was whether Hewitt was paid on a salaried basis under Regulation Section 541.602(a,) disqualifying him from overtime pay. The Court held that because Hewett’s pay was based on a daily rate, he was not paid a “salary,” as defined under regulations, did not meet the executive exemption, and therefore was owed overtime pay.

Certain employees working over 40 hours per week are entitled to overtime pay under the FLSA. Other employees do not qualify for overtime pay if they engage in executive, administrative, or professional duties and meet certain salary requirements and thresholds. The majority reasoned that because Hewitt’s rate of pay was expressed as a daily and not a weekly rate, he is not a salaried employee under regulations and, therefore, is entitled to overtime pay, even though his daily fixed pay exceeded the fixed weekly threshold defining “salary” in the Regulations.

An employee is not entitled to overtime if the employee is paid over a certain weekly threshold no matter how many hours are worked, has executive duties, and is paid a salary. If the employee earns at least $107,432, is paid at least $684 guaranteed per week (thresholds in effect for 2023), and has executive duties, the employee is not entitled to overtime pay under federal regulations.

In his dissent, Justice Kavanaugh reasoned that Hewitt earned more than enough to meet the weekly dollar threshold for a salaried employee to whom overtime is not due. However, that fact did not persuade the majority. Rather, the majority reasoned that Hewitt was entitled to overtime because he had no guaranteed weekly payment, and therefore the definition of “salary” under the regulations was not met. A daily guaranteed payment, no matter how great, does not meet the definition of “salary” for purposes of the overtime exemption for a highly compensated employee.

Thus, in structuring compensation, employers must consider not only the amount of guaranteed pay but also the timing of it in weekly or less frequent increments to exclude highly compensated employees from overtime pay.

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