United States: Six Figure Salary? Make Sure It's Really A Salary

How does an employer owe someone earning over $200,000 per year overtime? By claiming the employee is salaried exempt — but not really paying a salary.

The U.S. Supreme Court ruled on February 22, 2023 in Helix Energy Sols. Grp., Inc. v. Hewitt ("Hewitt") that even high six-figure earners must be paid a guaranteed weekly salary and not just paid day rates.

The case is a good chance for us to go back to the basics of wage and hour law under the Fair Labor Standards Act (FLSA). Under the FLSA, employers claiming "white collar" exemptions must satisfy three tests in order to avoid paying overtime: 1) the "salary basis" test, requiring payment of a salary regardless of the quantity or quality of the employee's work, 2) the "salary level" test, requiring payment of a preset salary above the set minimum threshold (which is currently $684 per week under the FLSA), and 3) the job "duties" test.

In the Hewitt case, the Supreme Court found the employer failed to meet the "salary basis" test for the job in question. The employer ran offshore oil rigs, and Mr. Hewitt typically worked 84 hours each week while on a rig. He earned over $200,000 each year. The employer paid Mr. Hewitt on a daily-rate basis without paying overtime. He therefore was paid the daily rate times the number of days he worked in each two-week pay period. Since his pay varied depending on the number of days he worked each week, the Court found that he was not paid a "salary," and therefore the employer owed him overtime.

The important reminder for employers is that white collar exemptions require — subject to strict exceptions — that an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.

Remember that state and local laws can be even more strict than the FLSA. For example, many states have higher weekly salary requirements and more strict salary basis rules. It is therefore also important for employers to understand how state and local laws may differ in determining if an employee is truly exempt from overtime.

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