Highly Compensated Employee Exemption Slated for U.S. Supreme Court Review in October 2022 Term
June 22, 2022
The U.S. Supreme Court has slated the first oral arguments for its October 2022 Term. Notably, on October 12, the Justices will hear arguments on the question of whether a supervisor making more than $200,000 per year is entitled to overtime pay. The case isHelix Energy Solutions Group, Inc. v. Hewitt.Below, the appeals court found that the employee was entitled to overtime. The appeals court reversed a judgment in favor of the oil and gas industry employer, which had argued that the employee, who was paid on a daily rate, was exempt from overtime compensation as a highly compensated executive employee. A daily-rate worker can be exempt from overtime pay but only “if” two conditions are met: (1) the minimum weekly guarantee and (2) the reasonable relationship conditions. Here, the employer did not offer a minimum weekly required amount paid “regardless of the number of hours, days or shifts worked,”. The employer also did not comply with the reasonable-relationship test. As a result, the employer failed to show that the employee was paid on a salary basis, according to the appeals court.
Employer says the employee is exempt.The employer contends that the employee “falls squarely within” the highly compensated employee exemption because he concedes that he performed executive duties, he earned at least $100,000 per year. Further, the employee is a highly skilled supervisor who earned over $200,000 annually while managing operations and supervising employees on the company’s offshore well-intervention vessels. “He emphatically is not, and does not claim to be, the type of blue-collar laborer whom the FLSA’s overtime provisions were designed to protect,” according to the employer.
Employee cries foul.The employee argued that because his substantial pay was calculated based on a daily, not weekly, minimum, he could not be deemed exempt without satisfying the minimum-guarantee-plus-extras provision in §541.604. The employer failed to establish the highly compensated employee regulation’s requirements, specifically Section B’s mandate that it paid the employee on a “salary or fee basis” as set forth in § 541.602. The Fifth Circuit correctly determined that the employer failed to meet this test because the employer failed to show it paid the employee—a daily-rate employee—on a “weekly, or less frequent basis,” and with, and not, “without regard to the number of days or hours worked.”
Since the employer could not establish that it paid the employee on a salary basis under the FLSA’s general rule regulation, the Fifth Circuit analyzed whether the employer could meet the minimum-guarantee-plus-extras regulation and determined that it could not. The employee contends that because the employer knows it cannot pass this regulation’s requirements, it argues that the Fifth Circuit erred by even considering § 541.604(b) and that two circuit courts have determined that the provision does not apply to the highly compensated employee. But none of these arguments pass muster—and all require the employer to prove that it paid the employee on a salary basis under § 541.602, according to the employee.
