The U.S. Supreme Court Has Expanded the Right to Overtime Pay

Every employer should review their wage and hour compliance on a regular basis because the laws are often changing, as evidenced by a recent U.S. Supreme Court decision relating to overtime pay. On February 22, 2023, the Supreme Court ruled that Michael Hewitt, a “tool-pusher” at oil and gas company Helix Energy Solutions, still qualified for overtime pay under the Fair Labor Standards Act (FLSA). From 2014 to 2017, Hewitt worked about 84 hours a week on an offshore oil rig. He supervised 12 to 14 workers and was paid between $963 to $1,341 per day, totaling over $200,000 per year, but he did not receive overtime pay.

The issue for the Supreme Court was whether or not Hewitt, who was paid at a daily rate and made over $200,000 a year, met the FLSA’s executive exemption for overtime. Employees exempt from the FLSA overtime rule typically must be paid a salary above a certain level and work as a "bona fide executive" (satisfying salary and duty requirements), administrative, or professional role. For Hewitt, the Supreme Court found that he did not meet the FLSA's salary-based criteria for an executive exemption because he was paid per day. The Supreme Court held that the executive exemption applies solely to employees paid by the week (or longer); it is not met when an employer pays an employee by the day, as Helix paid Hewitt.

The Supreme Court’s decision creates an important implication for employers seeking to classify an employee as exempt under the executive exemption. Anything other than an actual salary, where an employee is paid the same amount regardless of the quality or quantity of work performed, will not suffice for the purpose of an employee being exempt. The substantial amount of pay Hewitt received per year was not relevant, it was the manner in which he was paid that entitled him to overtime pay.

In light of the Supreme Court’s decision, employers with employees classified as exempt are encouraged to review the salary and duty requirements for the executive exemption, and ensure that exempt employees are being paid the requisite salary in a uniform manner on at least a weekly basis. Paying an employee at a daily rate is now perceived as hourly pay, as opposed to salary pay, and that would result in the employee being entitled to overtime.