Supreme Court Decides that Day-Rate Employees Are Entitled To Overtime

If you work hourly and over 40 hours a week, you should receive extra pay. But this rule isn't always straightforward, as shown in the Helix Energy Solutions Group v. Hewitt case recently decided by the U.S. Supreme Court. In Helix, Michael Hewitt worked 28 consecutive 12-hour days on an oil rig but wasn't paid overtime even though he worked more than 40 hours per week. Helix argued that he was exempt from overtime pay because he fell under the Fair Labor Standards Act's exemption for "bona fide executive, administrative, or professional" (EAP) employees.

The exemption is defined in two ways: the employee must earn a salary that exceeds a minimum threshold, and their job duties align with a "duties test"; or the employee must earn at least $100,000 per year, with "at least $455 per week paid on a salary or fee basis." Both parties agreed that Hewitt earned over both thresholds, but the question was whether he was paid on a "salary basis."

The court ultimately sided with Hewitt. To be paid on a "salary basis," an employee must regularly receive a predetermined amount of compensation regardless of the quantity or quality of work. This does not apply to a daily-rate worker, who is paid for each day they work. The court also rejected Helix's argument that Hewitt received his paycheck on a bi-weekly basis, stating that it did not fit the definition of "salary." The court also addressed another regulation, Section 604, which allows some employees who are paid a day-rate to be treated as salaried, but it did not apply in Hewitt's case.

Three justices dissented in two opinions. Justice Neil Gorsuch argued that the case should have been dismissed, while Justice Brett Kavanaugh and Justice Samuel Alito agreed with Helix's argument that Hewitt was paid on a "salary basis."

This decision is a victory for Hewitt and for employees generally, but the issue of whether highly paid day-rate workers are entitled to overtime is still up for debate because there is no clear definition of what constitutes a "highly paid" worker. The Fair Labor Standards Act (FLSA), which sets minimum wage and overtime requirements, does not provide a specific salary threshold for day-rate workers.

In 2020, the U.S. Department of Labor issued a final rule that raised the salary threshold for overtime eligibility for most workers from $23,660 per year to $35,568 per year. However, this rule did not address the issue of day-rate workers, leaving it up to interpretation by the courts.

Additionally, there have been conflicting court rulings on the issue. Some courts have held that day-rate workers are entitled to overtime, while others have ruled that they are not. This has created uncertainty for both employers and employees.

Overall, the lack of clear guidelines and inconsistent court rulings have contributed to the ongoing debate about whether highly paid day-rate workers are entitled to overtime.

Additionally, the Court’s majority decision did not address a key argument put forward by the company. At argument, Helix suggested that the salary-basis requirement was inconsistent with the statutory language. The court did not address this argument, concluding it had been waived – but Justice Kavanaugh and Justice Alito may have tipped their hands, writing that it was “especially dubious for the regulations to focus on how an employee is paid.”