COMP NEWS – The Supreme Court may soon hear a case that could change the way some highly-paid workers are compensated, as it seeks clarification on “hourly” compensation for workers paid at a day rate.

Michael Hewitt and his employer, oil and gas company Helix Energy Solutions Group, agree: His duties as a tool pusher meet the description of a bona fide executive, administrative or professional employee under the Fair Labor Standards Act. They agree, too, that Hewitt is paid well for his services, earning more than $200,000 a year.

On the surface, those details alone may seem unlikely to give rise to an employment law dispute played out before the nation’s highest court. And yet, there Helix and Hewitt were on Oct. 12, with the nine justices of the U.S. Supreme Court analyzing a small wrinkle in an otherwise presumably straightforward employment relationship.

Namely, is Hewitt — a worker paid highly on a daily, rather than a weekly, basis — entitled to earn substantially more money in overtime pay?

The question regarding overtime compensation comes down to details in FLSA (Fair Labor Standard Act) regulation.

Part 541 of the FLSA’s regulations describe the conditions under which bona fide executive, administrative or professional employees may be granted exemption from the law’s minimum wage and overtime requirements. To qualify, workers must not only perform certain duties as defined by the FLSA — i.e. the “duties test” — but they also must be compensated on a salary basis. 

According to Part 541.600, exempt employees generally must be compensated on a salary basis at a rate of no less than the specified weekly amount, currently $684 per week. Part 541.602 further defines “salary basis” as a situation in which an employee receives a “predetermined amount constituting all or part of the employee’s compensation which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” This amount must be received each pay period on a weekly or less frequent basis.

Of interest in Helix is Part 541.601, which outlines an exemption for certain highly compensated workers, defined as those with a total annual compensation of $107,432. These workers must still be paid at least $684 per week “on a salary or fee basis as set forth” in 541.602; the total annual compensation may include commissions, nondiscretionary bonuses and other nondiscretionary compensation; and employers are allowed to make so-called “catch up” payments to achieve the required pay level by the end of the year.

What makes Hewitt’s case of interest is that Helix compensated him using a day rate, arguably not on the “weekly or less frequent basis” specified in 541.602. Helix disputes this. In oral arguments Oct. 12, Paul D. Clement, counsel for Helix, said that Hewitt was guaranteed to earn $963 “for any week in which he worked a minute” and thus met the weekly minimum requirement, even though the company specified his rate as $963 per day.

The way that SCOTUS interprets this case could affect overtime compensation for workers across America.

To read more about SCOTUS and the Helix case on overtime compensation, click here.

For more Comp News, see our recent posts.

 

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