Supreme Court Clarifies the “Salary Basis” Test Under the FLSA for Highly Compensated Executives

On February 22, 2023, the United States Supreme Courtroom produced its ruling in Helix Vitality Methods Team, Inc. vs. Hewitt, clarifying that workers who are paid a daily charge most likely do not qualify for the govt exemption less than the Honest Labor Benchmarks Act (the “FLSA”).

Information:

Michael Hewitt filed an motion versus his employer, Helix Energy Solutions Team, in search of additional time fork out below the FLSA, which assures additional time shell out to included workforce when they get the job done more than 40 hrs a 7 days. Mr. Hewitt worked for Helix as a Instrument Pusher on an offshore oil rig. He typically worked as numerous as 84 several hours a week. For this get the job done, he acquired around $200,000 a 12 months, but was paid a everyday charge, with no additional time compensation. Helix argued that Mr. Hewitt competent as “a bona fide govt,” excluding him from the FLSA’s protections.

To be thought of a bona fide government, and employee will have to typically satisfy three tests: (1) the “salary basis” check, which needs that an personnel obtain a preset wage (2) the “salary level” examination, which necessitates that preset wage to exceed a specified quantity and (3) the position “duties” exam. The duties check (which demands that the worker handle and/or direct other staff and have the potential to employ the service of and fireplace) is relaxed for “highly compensated employees,” meaning workforce who make at minimum $100,000 for every 12 months. Listed here, the sole query was whether Mr. Hewitt fulfilled the “salary basis” exam where by he was paid was a day by day charge for his operate. Mr. Hewitt argued that due to the fact the each day amount did not provide him a bare minimum certain weekly spend, the salary basis exam could not be fulfilled.

Holding

The the greater part concluded that a daily-rate personnel does not meet up with the “salary basis” test discovered in in the language of the FLSA exactly where there is no weekly bare minimum assured fork out. The the vast majority was guided by the basic language of the FLSA, which clarifies that:  

“An worker will be viewed as to be paid out on a ‘salary basis’ . . . if the personnel regularly receives each and every pay period on a weekly, or considerably less repeated basis, a predetermined total constituting all or element of the employee’s compensation, which sum is not subject to reduction simply because of variations in the high-quality or amount of the work executed. Matter to [certain exceptions], an exempt worker will have to obtain the whole income for any 7 days in which the staff performs any perform with out regard to the range of days or hours labored.”  

The Courtroom regarded as that a provision in the FLSA permits “daily-rate” employees to qualify as paid out on a salary foundation less than selected situations, even though their pay out is “computed on an hourly, a day-to-day or a change foundation.” The the vast majority determined, however, that beneath these circumstances, the everyday pay out could not qualify for the reason that Mr. Hewitt was compensated solely dependent on the amount of days he labored, with no minimum amount assurance of a weekly volume.

Takeaway

This final decision clarifies for companies that most employees earning a every day amount will not qualify for the government exemption below the FLSA, specifically where by the employee is not confirmed a weekly shell out at or exceeding the salary stage. Of system, California companies thinking about whether its personnel qualify for an govt exemption exempting the personnel from overtime shell out should also take into account the requirements under the California Labor Code. If you have any queries whether your workers fulfill the govt exemption beneath either California or federal law, contact your Weintraub Tobin Labor and Employment legal professional for enable.