Fifth Circuit: Maintaining FLSA Overtime Exemption with a Daily Rate of Pay

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September 9, 2021

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In Hewitt v. Helix Energy Sols. Grp., Inc., the Fifth Circuit Court of Appeal reviewed when a highly compensated employee may be paid a daily rate of pay and still be exempt from overtime under the Fair Labor Standards Act (FLSA). Specifically, even though earnings may be computed on a daily basis, the employee’s pay must also be guaranteed to be at least the minimum weekly required amount paid on a salary basis, regardless of the number of hours, days, or shifts worked, and there must be a reasonable relationship between the guaranteed amount and the amount actually earned. (29 C.F.R. § 541.604(b).)

There, an oil and gas industry employee was paid a daily rate of $1000 and his employer claimed he was a highly compensated employee exempt from overtime. However, highly compensated employees must be paid on a salary basis. An individual cannot be a “highly compensated employee” unless their total annual compensation satisfies the salary-basis test. The court stated that “the only way for an employee to have his pay “computed on a daily basis” “without violating the salary basis requirement” is to comply with § 541.604(b).” Ultimately, rather than look at the amount of pay, the court looked to the statutory and regulatory procedural requirements instead. “There is no principled basis for applying or ignoring § 541.604(b) based on how much the employee is paid.”

Action Items

  1. Review pay structures to ensure compliance with FLSA overtime exemptions.
  2. Update offer letters to be consistent with FLSA requirements.
  3. Train appropriate personnel on required pay structures.
  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.

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