Supreme Court Upholds Entitlement to Overtime for Worker Earning More Than $200,000 a Year

In a case closely watched by the oil and gas industry, the United States Supreme Court ruled in Helix Entergy Solutions Group, Inc. v. Hewitt that an oil rig worker earning more than $200,000 a year was misclassified as exempt by his employer, in violation of the Fair Labor Standards Act (FLSA), and is entitled to unpaid overtime wages. The case hinged on the “salary basis” test for the white-collar exemptions from overtime under the FLSA, specifically the “highly compensated employee” rule, which requires a worker's total yearly earnings equal at least $107,432.

While working offshore, Hewitt was paid on a day rate for each day worked, and Helix classified him as exempt from overtime on the basis that he was a highly compensated executive earning a six-figure income. As described by the Court, under “[t]he day-rate basis on which Hewitt was paid...he receives a certain amount if he works one day in a week, twice as much for two days, three times as much for three, and so on.” Hewitt argued that because he did not receive a weekly guaranteed minimum salary in at least the amount required under Department of Labor regulations, he was misclassified as exempt and was entitled to years of retroactive overtime pay for the twelve-hour shifts worked during each 28-day hitch on an offshore oil rig.

In the 6-3 ruling, the Supreme Court upheld the 2021 decision of the U.S. Court of Appeals for the Fifth Circuit, which ruled in Hewitt’s favor. In the opinion written by Justice Elena Kagan, it stated the “critical question” was whether Hewitt was paid on a salary basis under the regulations of the FLSA. In the latest opinion, Justice Kagan wrote:

The answer is no: Helix did not pay Hewitt on a salary basis as defined in §602(a). That section applies solely to employees paid by the week (or longer); it is not met when an employer pays an employee by the day, as Helix paid Hewitt.

In light of the Supreme Court’s ruling, an employer who pays a worker on a day rate basis cannot claim an entitlement to FLSA exemption, no matter how much the worker is ultimately paid in a year, without also complying with the minimum salary requirements under the DOL’s salary basis regulations.

Please contact Mark Fijman or any member of Phelps’ Labor and Employment team if you have questions or need compliance advice or guidance.