The recent US Supreme Court decision in Helix Energy Solutions Group, Inc. v. Hewitt has significant implications for employers in industries that commonly pay employees using salaried day rates, such as construction, healthcare, and energy. The Court held that to qualify for the highly compensated employee exemption to the overtime requirements under the Fair Labor Standards Act (FLSA), the employee must be paid a salary. This ruling emphasizes the importance of adhering to the technical requirements of the FLSA, as failing to do so can have dire consequences for employers.
Background
The case revolved around plaintiff Michael Hewitt, a “toolpusher” on an oil rig, who was employed by Helix Energy from 2015 to 2017. Hewitt earned more than $200,000 per year while being classified as an exempt employee paid a daily rate. After being terminated, Hewitt filed a suit claiming he was entitled to overtime under the FLSA. Helix Energy argued that Hewitt was exempt from overtime due to the Highly Compensated Employee exemption (HCE).
The Supreme Court Decision
In a 6-3 decision, the Supreme Court ruled in favor of Hewitt, holding that Helix Energy had not paid him on a salary basis and therefore, he was entitled to overtime. The court focused on the text of the regulation that requires employees to be paid a predetermined amount each week, regardless of the number of hours or days worked. A daily rate, like the one paid to Hewitt, did not satisfy this standard.
Practical Implications
The Helix Energy decision serves as a reminder that under the FLSA, form matters as much as substance. Even though Hewitt received significant compensation, the fact that he was not paid on a salary basis meant he could not satisfy the white-collar exemptions, including the HCE.
For employers, this case highlights the importance of ensuring compliance with FLSA regulations. Employers in industries where day rates are prevalent should be cognizant of their pay practices to ensure employees classified as exempt receive a guaranteed minimum weekly salary to avoid misclassification and costly class or collective action claims. This underscores the need for employers to continuously review the rate, frequency, and method of calculating pay for employees classified as exempt.
For a more detailed analysis of the Hewitt case and Supreme Court’s decision, please see the full article from Fox Rothschild attorneys Glen Grindlinger and Aaron Wynhausen here.