Earning over $200,000?

The U.S. Supreme Court has made a big decision in a recent case that will affect many employers and employees alike. The case, Helix Energy Solutions Group, Inc. v. Hewitt has far-reaching consequences for the Fair Labor Standards Act (FLSA) and the "salary basis test."

The case centered around a rig oil worker who, despite earning a daily rate that added up to over $200,000 a year, said he was entitled to overtime pay because he did not meet the salary basis requirement mandated by the Fair Labor Standards Act (FLSA).

The court considered the FLSA and its "salary basis test," which has implications for white collar exemptions from overtime pay. Hewitt was paid more than $200,000 annually but still entitled to overtime pay as he was not paid on a salary basis, as required by the FLSA. The employer argued that Hewitt should be exempt from the FLSA's overtime requirements as he had exempt job duties, but the court held that his compensation structure did not meet the salary basis test under the regulations.

The court also rejected the employer's argument that Hewitt should be considered a "highly compensated employee" under FLSA overtime regulations. While highly compensated employees only need to have some exempt job duties, the court indicated that the threshold question is whether the employee was paid on a "salary basis." In Hewitt's case, as he was paid a daily rate, he did not meet the salary basis test, and thus the amount of his compensation was irrelevant.

The court also clarified that there is a distinction between satisfying the "salary-basis" test and the "salary-level" test. To demonstrate that a salary level satisfies the regulation, the threshold question is whether the employee was paid on a "salary basis." In this case, since the employee was paid a daily rate, the amount of his compensation was irrelevant to his eligibility for overtime pay.

The U.S. Department of Labor (DOL) has indicated its intention to issue new overtime regulations that will increase the minimum salary threshold required to qualify for the white collar exemptions from overtime pay. Currently, an employee must be paid at least $684 per week to qualify for the exemption, among other requirements. The proposed overtime rules are expected to be released by the DOL in May 2023, and this ruling is expected to have significant implications for employers and employees alike.

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What is the FLSA’s salary-basis test? The "salary-basis" test is a requirement under the Fair Labor Standards Act (FLSA) in the United States that an employee must be paid a predetermined amount of money each week that is not subject to reduction based on the quantity or quality of work performed. In other words, an employee must be paid a set salary each week to meet the "salary-basis" test, which ensures that the employee is not improperly classified as exempt from overtime pay. The salary must meet a minimum threshold, currently $684 per week, to qualify for most white-collar exemptions from overtime pay. This test is one of the key criteria that employers must meet to classify employees as exempt from overtime pay requirements.

What is the FSLA’s salary-level test? The "salary-level" test is another requirement under the Fair Labor Standards Act (FLSA) that determines whether an employee is exempt from overtime pay. This test requires that an employee be paid a minimum salary amount that is set by the U.S. Department of Labor (DOL) in order to be considered exempt from overtime pay. The current minimum salary level required to qualify for the white-collar exemption is $684 per week, or $35,568 annually.

This means that an employee must earn at least this amount in salary each week in order to qualify for the exemption, regardless of how many hours they work. However, it's important to note that meeting the salary level test alone is not sufficient for exemption; the employee must also perform specific job duties that meet certain criteria in order to be classified as exempt from overtime pay.

What is a highly compensated employee according to the FLSA? Specifically, to be considered a highly compensated employee under FLSA regulations, an employee must be paid a total annual compensation of at least $107,432, and must perform at least one of the duties of an exempt executive, administrative, or professional employee. Highly compensated employees are subject to different rules than other employees when it comes to overtime pay under FLSA regulations.

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