There have been updates to overtime pay that employers should know based on a recent case ruling that has implications for employers and high-earning individuals. On February 22, 2023, the United States Supreme Court made a significant ruling, stating that employees earning over $200,000 annually are entitled to overtime pay under the Fair Labor Standards Act (FLSA). This decision provides clarity on when highly compensated employees must receive overtime pay.
In the recent case of Helix Energy Solutions Group, Inc. v. Hewitt, the Court sided with the employee, Michael Hewitt, who claimed that his employer had violated the FLSA by not paying him overtime. What makes this case notable is that Hewitt earned a substantial salary, exceeding $200,000 per year.
Previously, employers believed that employees earning such high salaries were exempt from overtime pay. However, the Supreme Court’s ruling clarified that even employees with six-figure incomes may still be entitled to overtime pay.
The Court based its decision on the definition of “salary basis” outlined in the FLSA regulations. It concluded that Hewitt did not meet the requirements to be considered a “salaried” employee because he was paid based on the number of days worked, rather than on a weekly or less frequent basis.
Furthermore, the Court determined that Hewitt did not qualify for the “special rule” that applies to daily-rate workers. This rule allows daily-rate employees to be considered salaried if they receive a guaranteed weekly payment that reasonably reflects their earnings and meets the regulatory minimum. However, this rule did not apply to Hewitt since he was not promised a weekly rate, regardless of the number of days he worked.
Updates to Overtime Pay
So, what does this mean for employers and high-income earners? It is crucial to review your pay structure and overtime pay practices. Consider the following:
Payment Frequency: Ensure that highly compensated employees are paid on a weekly or less frequent basis, as required by the FLSA. Avoid paying them based on the number of days worked.
Guaranteed Weekly Payment: If you are an employer, make sure that any employees paid on a daily rate receive a guaranteed weekly payment that reasonably reflects their earnings and meets or exceeds the regulatory minimum. If you are an employee, review your pay structure and earnings to ensure fair compensation.
By adhering to these guidelines, you can reduce the risk of legal challenges and potential penalties related to non-compliance with overtime pay regulations.
Navigating these laws can be complex. If you need assistance in understanding your company’s pay structure or ensuring compliance with overtime pay regulations, please reach out to us. We are here to provide guidance and help you stay informed and compliant.
Disclaimer: This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is a substitute for, qualified legal advice. Your review or receipt of this article by Lexern Law Offices, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and does not reflect the opinion of the LLG.