On Feb. 22, 2023, the U.S. Supreme Court held in Helix Energy Solutions Group Inc. v. Hewitt (Helix) that employees must be compensated on a salary basis to qualify for the highly compensated employee overtime exemption under the Fair Labor Standards Act (FLSA).

FLSA Overtime Exemptions

To qualify for an overtime exemption under the FLSA, employees must satisfy certain specified criteria for that exemption. The most common types of FLSA overtime exemptions apply to so-called “white collar” employees. One of these white-collar exemptions applies to highly compensated employees and requires these employees to:

  • Earn a total annual compensation of $107,432 or more, including at least $684 per week paid on a salary or fee basis;
  • Perform office or nonmanual work as their primary duty; and
  • Customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.
Supreme Court Decision

In Helix, the employer claimed that an employee (Hewitt), who made more than $200,000 per year but was paid on a daily basis, qualified for the highly compensated employee overtime exemption. Its argument was that paying a minimum amount per day could count as a salary.

The Court disagreed, ruling that the FLSA plainly requires highly compensated employees to receive a salary. The Court also held that this requirement is not met “when an employer pays an employee by the day, as Helix paid Hewitt.” With this decision, the Court reasoned that the salary basis test “typically refers to the unit or method for calculating pay, not the frequency of its distribution.”

Impact on Employers

It is unlikely that many employers will have to change their payroll policies and procedures for highly compensated employees. However, this decision is a clear signal that courts may require strict compliance with FLSA overtime exemptions. As a result, employers should review their exempt employee classification process to make sure they meet not only duty qualification but also salary requirements.



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