Wage and Hour Case Notes

• Jurisdiction: United States,Federal
• Author: Nicole R. Roysdon
• Publication year: 2023
• Citation: Vol. 37 No. 3

WAGE AND HOUR CASE NOTES

AUTHOR^*

Nicole R. Roysdon

DAILY RATE WORKERS DO NOT SATISFY SALARY BASIS TEST OF FLSA EXECUTIVE EXEMPTION

Helix Energy Solutions Group, Inc. v. Hewitt, 143 S. Ct. 677 (2023)

In this case, the U.S. Supreme Court examined the federal Fair Labor Standards Act's (FLSA) executive exemption (29 U.S.C. § 213(a)(1)), and held it only applies if employees are paid a salary by the week or longer. The FLSA mandates that employers pay overtime to employees unless they satisfy an exemption. One of the FLSA exemptions is the executive exemption, under which an employee is excluded from the FLSA's protections if they meet three tests: (1) the "salary basis" test, which requires that an employee receive a predetermined and fixed salary that does not vary based on the amount of time worked; (2) the "salary level" test, which sets the minimum amount of the salary; and (3) the "duties" test. 29 USC § 213(a)(1); 84 Fed. Reg. 51230. This exemption is implemented through two federal regulations, the second of which applies to highly compensated employees who make at least $100,000 a year (which amount increased in 2020), like the employee at issue in this case. 29 CFR § 541.601(a), (b)(1). The regulation considers highly compensated employees to be exempt if they are compensated at least $455 per week (which has increased since 2020) on a salary basis and meet the duties test.

At issue was an employee who worked 84 hours a week on an oil rig, for one month at a time, was paid a daily rate of at least $963, and earned over $200,000 a year, who sued his employer for unpaid overtime. His employer claimed he was exempt from overtime under the executive exemption applicable to highly compensated employees.

The question for the Court was whether the employee was paid on a salary basis. The federal regulations set forth two ways in which an employee can satisfy the salary basis test. Under 29 CFR § 541.602(a), an employee is paid on a salary basis if the employee receives a set amount of money for the entire week, regardless of the number of hours or days worked. Under 29 CFR § 541.604(b), an employee who is paid on an hourly, shift, or daily basis is paid on a salary basis if the employee is guaranteed a minimum weekly amount regardless of the number of hours, shifts, or days worked, and there is a reasonable relationship between the guaranteed amount and the amount actually earned. The parties did not dispute that 29 CFR § 541.604(b) was inapplicable to the employee's compensation, so the court focused on 29 CFR § 541.602(a).

In holding that the employee was likewise not paid on a salary basis under 29 CFR § 541.602(a), the Court found the text of the regulation excludes daily rate workers. Because a daily rate worker is only paid for the days they work, by definition they are not paid the full salary for the week (the "predetermined amount") without reduction and without regard to the number of days or hours worked. The Court also found important the standard meaning of the word "salary," which connotes a...