Katie Campbell
By Katie Campbell
Employers should be aware of the potential consequences for mistakes when it comes to the Fair Labor Standards Act and employee misclassification. A U.S. Supreme Court case decided in February 2023 highlights related issues.
In Helix Energy Solutions Group Inc. v. Hewitt, an oil rig executive who often worked 12-hour days seven days per week from 2014 to 2017 filed a lawsuit alleging misclassification under the FLSA. Although his employer had classified him as exempt for purposes of the FLSA under the “bona fide executive” exemption, he was paid a daily rate ranging from $963 to $1,341. His paycheck each biweekly pay period would be the equivalent of the daily rate multiplied by the number of days worked, guaranteeing that so long as he worked at least one day a pay period, even when he was receiving the lower end of the daily rate range, he would earn at least $963 per pay period, which exceeded the weekly minimum salary set by the FLSA for the executive exemption of $455 per week at that time.
However, in order to qualify for the executive exemption under the FLSA, several conditions must be met:
• An employee’s primary duty must be managing the enterprise or managing a customarily recognized department or subdivision of the enterprise.
• The employee must customarily and regularly direct the work of at least two or more other full-time employees (or the equivalent).
• The employee must have the power to hire and fire or their suggestions and recommendations as to the employment status of others must be given particular weight; and
• They must be compensated on a salary basis at a rate of not less than $684 per week ($455/week during the time the employee was employed on the oil rig).
Per the Department of Labor, to be paid on a “salary basis” means the employee must receive “a predetermined amount of compensation each pay period on a weekly, or less frequent, basis.”
The Supreme Court determined that although the employee was highly paid, he was not exempt from the overtime protections set forth in the FLSA due to his rate of pay being per diem instead of a true salary. The decision highlights the fact that employers with highly compensated employees who are paid in non-traditional ways or on unique schedules should take note of their adherence to related best practices. Although most highly-paid employees are paid a fixed salary, meaning the holding in Helix may have a limited impact, employers who offer unique compensation arrangements may want to reevaluate their workforce to ensure compliance and avoid overtime charges in the future.
Take stock of your company’s internal practices, including employee classifications under the FLSA. Consult with your human resources department and direct related issues to legal counsel.
The foregoing should not be understood as, or considered a substitute for, legal advice. For specific inquiries, please contact Katie Campbell or another licensed attorney.
Katie Campbell is an attorney with Crowe & Dunlevy, crowedunlevy.com, and a member of the firm’s Labor & Unemployment Practice Group.