Highly Compensated Managers, Administrators, and Other Employees May Be Entitled to Overtime
While many believe highly compensated managers, administrators, and other employees are not entitled to overtime under the federal law known as the Fair Labor Standards Act (FLSA), that notion is incorrect. In the recent case of Helix Energy Solutions v. Hewitt, the Supreme Court held that if highly compensated employees do not satisfy the “salary basis test” – one of the essential elements for key exemptions to the FLSA – then the employees may be entitled to overtime notwithstanding their high salary. In Hewitt, the plaintiff earned over $200,000 per year. Nonetheless, the high Court held that because he was compensated on a day rate (per diem) basis instead of a salary basis, he was entitled to overtime.
Pursuant to the FLSA, in order for managers and administrators, as well as some other “white-collar” workers to be considered exempt from overtime they must (1) be paid on a salary basis; (2) earn above the minimum salary threshold which is, as of July 1, 2024, $844 per week (or $43,888 per year); and (3) have management or administration as their primary duty.
The issue in Helix Energy related to the first requirement. Specifically, the Court considered whether Hewitt’s day rate passed the salary basis test. The salary basis test requires employees to be paid a predetermined amount of money that is not subject to reduction based upon the quality or quantity of work done. Because Hewitt’s day rate varied depending on the number of days he worked each week, his compensation was not “predetermined” as required and therefore he was entitled to overtime for the hours he worked over 40 in a work week.
Helix Energy makes clear that the amount of money an employee makes is not dispositive of certain FLSA exemptions. Indeed, based upon his compensation and hours worked, Hewitt could be entitled to upwards of $11,500 per week in overtime. Thus, even employees making significant annual compensation can be overtime-eligible if their employer does not guarantee them an unvarying salary. This means that many engineers, banking and finance workers, and other high-income earners and professionals, may be entitled to overtime if they are not paid a salary.
If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].
