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U.S. Supreme Court Reinforces Overtime Pay for Daily-Rate Workers

By Tala Dahbour posted 03-20-2023 08:57



In Helix Energy Sols Grp, Inc v Hewitt, No 21-984, ___ US ___ (Feb 22, 2023), the respondent employee did not qualify as a bona fide executive subject to exemption from the Fair Labor Standards Act of 1938’s (FLSA) overtime pay guarantee. Daily-rate workers, regardless of income level, qualify as paid on a salary basis only if their compensation meets conditions set out in 29 CFR 541.604(b).


Michael Hewitt filed an action against his employer, Helix Energy Solutions Group, claiming he was entitled to overtime pay as a covered employee under the FLSA. Despite Hewitt working well over 40 hours per week, Helix paid Hewitt on a daily-rate basis with no overtime compensation under the justification that Hewitt qualified as “a bona fide executive,” 29 USC 213(a)(1), which precluded him from overtime compensation under the FLSA. The district court granted summary judgement in favor of Helix, finding that Hewitt fell within the bona fide executive exception. The Fifth Circuit reversed, and the Supreme Court granted certiorari.


Bona Fide Executive Test

The secretary of labor has established the bona fide executive standard through two separate rules: (1) a “general rule” applying to those making less than $100,000 per year and (2) a rule applying to highly compensated employees (HCEs) who make $100,000 or more per year. 29 CFR 541.100, .601(a), (b)(1). Hewitt qualifies as a HCE. Therefore, to meet the exception, three distinct tests are applicable:

1.      the “salary basis” test, requiring a predetermined and fixed salary regardless of the amount of time worked;

2.      the “salary level” test, setting a minimum salary amount; and

3.      the “executive duties” test, requiring at least one of the following three to be true:

a.       their primary job is management,

b.      they regularly direct the work of others, and

c.       they have authority to hire and fire.

29 CFR 541.100(a).

Salary Basis Analysis

With a paycheck of $963 per week, it is undisputed that Hewitt qualifies under the salary level test and both parties agreed that Hewitt qualifies under the executive duties test. Therefore, the only inquiry before the court was whether Hewitt met the salary basis test governed by 29 CFR 541.602(a) and .604(b).

29 CFR 541.602(a) provides that

an employee will be considered to be paid on a “salary basis” … if the employee regularly receives each pay period on a weekly, or less frequent basis, 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.

Alternatively, 29 CFR 541.604(b) concerned workers with pay “computed on an hourly, a daily or a shift basis” and provides that these payment structures may not violate the salary basis requirement if there were a guarantee of weekly payment approximating what the employee usually earns.

As a daily-rate employee, Hewitt was not paid on a salary basis under 29 CFR 541.602(a). Further, Helix acknowledged that Hewitt’s compensation did not satisfy the conditions under 29 CFR 541.604(b). The Court also disagreed with Helix’s assertion that 29 CFR 541.604(b) operated independently of HCEs.


Due to the daily-rate nature of Hewitt’s compensation, which is explicitly inconsistent with 29 CFR 541.602(a) and the failure to satisfy conditions under 29 CFR 541.604(b), the Court concluded that Hewitt was not paid on a salary basis, disqualifying him as a bona fide executive. In response to Helix’s public policy concerns that explicitly excluding daily-rate workers from 29 CFR 541.602(a) would be burdensome on employers and would impose significant retroactive liability, the Court dismissed these concerns and reiterated that workers are not “deprived of the benefits of the Act simply because they are well paid,” citing Jewell Ridge Coal Corp v Local No 6167, United Mine Workers of America, 325 US 161, 167 (1945). Accordingly, the Court held that Hewitt, as a daily-rate employee, was not exempt from the FLSA and was eligible under that statute for overtime pay.