What’s the Supreme Court’s Decision on Overtime for Highly Compensated Executives Means for Employees
Overtime pay is designed to ensure that employees are adequately compensated for working beyond their standard hours.
But employees often have a number of misconceptions about who is entitled to it, and when. As a result, it’s all too easy to lose out on compensation you’re legally owed because of an employer’s oversight — or their malicious opportunism.
A recent Supreme Court case is a prime example. Michael Hewitt, an employee on an offshore oil rig based in Houston, sued his former employer for unpaid overtime accumulated from three years of 80-hour workweeks.
His employer, Helix Energy Solutions, argued that since Hewitt was receiving around $200,000 annually, he was legally exempt from the right to receive overtime as a “highly compensated employee” under the Fair Labor Standards Act (FLSA), which details national overtime regulations.
In this blog post, we’ll take a look at what the FLSA actually says about overtime pay, how the Supreme Court handled the dispute, and what their surprising decision means for employees and employers moving forward.
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Who Is Entitled To Overtime Pay Under U.S. Law?
The Fair Labor Standards Act (FLSA), passed in 1938, was a landmark piece of national labor legislation. Many of the regulations included in the Act are now familiar features of the employment culture in the U.S. today: for instance, rules around minimum wage, child labor, and overtime pay.
The FLSA requires that employees who work more than 40 hours in a week be paid at a higher rate for those additional hours: specifically, 1.5x their regular hourly pay (“time and a half”).
Technically, the law assumes that all employees, hourly and salaried alike, are entitled to overtime unless they meet the qualifications to be exempt.
For instance, many workers fall under what’s called the “white collar exemption” to the FLSA. This says that employees who receive salaries and whose jobs involve certain non-manual duties are exempted from the right to overtime.
The white collar exemption rule breaks down even further to define what kinds of roles it includes:
- Administrative Exemption: This covers people who assist in the management or operation of a business. In order to fall into this exemption, a person must exercise discretion and independent judgment with regard to important matters.
- Executive Exemption: This includes people who primarily manage a business or division of a business. To be covered, a person must supervise two or more full-time employees and have a role in hiring and firing employees.
- Professional Exemption: This covers people who perform work that requires specialized knowledge or education, such as doctors, dentists, engineers, architects, or lawyers.
The FLSA also includes an exemption for “highly compensated employees” who meet the following criteria:
- Customarily and regularly perform at least one of the responsibilities of an exempt executive, administrative, or professional employee
- Earn total annual compensation of $107,432 (no less than $684 per week)
- Receive this pay on a salary basis
This rule allows certain employees to be considered exempt in their roles because of how much (and how) they’re paid — even if they don’t meet all of the other requirements for the white collar exemption that applies to their role.
For example, someone who’s paid a $200,000 salary and oversees a team of two or more people could be designated a “highly compensated executive,” even if they don’t have the power to hire or fire other employees.
Independent contractors aren’t technically “exempt,” but they are also not eligible for overtime pay because the law doesn’t consider them “employees.”
What Happened In Helix Energy Solutions Group, Inc. V. Hewitt?
From 2014-2017, Michael Hewitt worked for Helix Energy Solutions Group as a “toolpusher” on an offshore oil rig. His role involved overseeing some of the rig’s daily operations, as well as supervising a group of up to 14 workers.
The hours were demanding, to say the least. Hewitt normally worked 12 hours a day, seven days a week, in 28-day rotations — 28 days of work, followed by 28 days of rest onshore, then back to work, etc.
Helix Energy paid Hewitt by the day, at a rate that fluctuated around $1,000 per day’s work. But although Hewitt ordinarily worked around 84 hours a week — over twice the standard 40 hours — he never received any overtime pay.
Why? His company claimed that since Hewitt was earning around $200,000 a year based on this pay rate, he was a “highly compensated employee” and thus exempt from overtime laws.
Although Hewitt’s situation initially appeared to meet the requirements for this exemption, the situation was more complicated. Yes, Hewitt supervised other workers. Yes, he made well over the minimum annual amount to be considered “highly compensated.”
But the deciding factor in the case turned on whether or not his pay was on a “salary basis.” Under the FLSA, a salary is defined as a fixed, predetermined amount of compensation paid to an employee on a regular basis regardless of how many hours they work in a given week.
Hewitt argued that since he was paid on a daily rate, his weekly take-home pay was subject to change based on the amount he worked. Even if he worked fairly consistent hours (enough to take home $200k a year) he had no guarantee of compensation for the days and weeks he didn’t work — unlike a salaried employee.
To the surprise of many, the Supreme Court sided with Hewitt, finding that he did not meet the strict regulations for the highly compensated executive exception, and thus was owed four years of overtime back pay.
What Does This Ruling Mean For Employees?
Although this ruling is certainly an exciting win for Hewitt himself, it’s questionable how much of an impact it will have on other highly compensated employees.
For one, the Court’s decision hinged on the technical details of a very specific situation. Outside of the energy industry, it’s rare for employers to use a day-rate pay structure for individuals who could be considered “highly compensated” exceptions to the overtime rules.
Generally, employees with executive, administrative, or professional responsibilities are far more often paid on a fixed salary basis — as required for FLSA exemption rules.
The Court also pointed out that in certain situations, employees who are paid on a daily or hourly basis could still be considered exempt, and thus not entitled to overtime.
For example, if an employer were to guarantee workers a weekly payment greater than the required $684, “regardless of the number of hours, days or shifts worked,” that would legitimately exempt them from overtime pay under the FLSA.
Nevertheless, this case is an encouraging reminder to employees everywhere: don’t let pressure from your employer get in the way of you getting the compensation you’re owed.
Here are three things you can do if you’re wondering whether you might be entitled to overtime compensation:
- Understand your employee status and job duties: If you’re paid a salary, do you qualify for one of FLSA occupational exemptions? Does your job title accurately reflect the responsibilities that you have? Some employers will intentionally misclassify workers as exempt in order to avoid paying overtime.
- Check your timesheets: If you’re a non-exempt employee who’s paid hourly, keep track of your pay stubs and make sure that you’re receiving the legally required overtime rate for any qualified hours. Withholding legally entitled overtime pay is a form of wage theft, and there are steps you can take to get legal restitution.
- Consult with an expert: If you have unanswered questions about your status as an employee or the legality of your employer’s policies, reach out to an experienced employment lawyer.
Contact an Employment Lawyer for Assistance
An attorney who’s familiar with the ins and outs of labor law can assess your situation and advise you on the best way to move forward in case you do have a claim to unpaid wages.
Different states may also have slightly different laws around overtime pay — for example, California’s overtime laws aren’t the same as those in New York.
Ottinger Employment Lawyers have been working for over twenty years as advocates for employees whose rights have been violated. If you have questions or concerns, get in touch with an experienced attorney today to discuss the details of your case and how we can help you.