5th Circuit: Daily Rate Pay is Not Exempt from Overtime Pay Rules


All Employers with LA, MS, and TX Employees


April 20, 2020


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On April 20, 2020, in Hewitt v. Helix Energy Sols. Grp., Inc., the Fifth Circuit Court of Appeal stated that an employee who is paid a daily rate is not paid on a “salary basis.” The Fair Labor Standards Act (FLSA) states:

“An employee will be considered to be paid on a ‘salary basis’ within the meaning of this part if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.”

The court stated that the term “predetermined amount” of pay means that an employee knows what they will be paid before the work is performed. There, an oil rig worker was paid on a biweekly basis a set amount for each day worked. Although the employee knew he would be paid biweekly, the exact amount of pay was not calculated until after the work was performed, because it was based on the number of days worked in the week. The FLSA requires exempt employees to receive the full salary for any week in which work is performed, without regard to the number of days or hours worked, which was not the case there.

Action Items

  1. Review employee overtime exemption status in connection with this ruling.
  2. Update payroll procedures for daily rate workers to include overtime calculations.
  3. Consult with legal counsel for historical corrections.
  4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2020 ManagEase

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