Helix Energy Sols. Grp., Inc. v. Hewitt, 2023 U.S. LEXIS 944 (S. Ct. February 22, 2023) (Kagan, J.) The Fair Labor Standards Act of 1938 (FLSA) guarantees that covered employees receive overtime pay when they work more than 40 hours a week. But an employee is not covered, and so is not entitled to overtime compensation, if he works “in a bona fide executive, administrative, or professional capacity,” as those “terms are defined” by agency regulations. 29 U. S. C. §213(a)(1). Under the regulations, an employee falls within the “bona fide executive” exemption only if (among other things) he is paid on a “salary basis.” 29 CFR §541.100(a)(1) (2015); see §541.601(b)(1). Additional regulations elaborate on the salary-basis requirement, as applied to both lower-income and higher-income employees.
The question here is whether a high-earning employee is compensated on a “salary basis” when his paycheck is based solely on a daily rate—so that 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. We hold that such an employee is not paid on a salary basis, and thus is entitled to overtime pay.
From as early as 1940, the Secretary’s “bona fide executive” standard has comprised three distinct parts. See 84 Fed. Reg. 51230 (2019) (summarizing the standard’s history). The first is the “salary basis” test—the subject matter of this case. Ibid. The basic idea for now (greater detail and disputation will follow) is that an employee can be a bona fide executive only if he receives a “predetermined and fixed salary”—one that does not vary with the precise amount of time he works. Ibid. The second element is the “salary level” test: It asks whether that preset salary exceeds a specified amount. Ibid. And the third is the “duties” test, which focuses on the nature of the employee’s job responsibilities. Ibid. When all three criteria are met, the employee (because considered a bona fide executive) is excluded from the FLSA’s protections.
The rule thus ensures that the employee will get at least part of his compensation through a preset weekly (or less frequent) salary, not subject to reduction because of exactly how many days he worked. If, as the rule’s second sentence drives home, an employee works any part of a week, he must receive his “full salary for [that] week”—or else he is not paid on a salary basis and cannot qualify as a bona fide executive. Ibid.
From 2014 to 2017, respondent Michael Hewitt worked for petitioner Helix Energy Solutions Group as a “toolpusher” on an offshore oil rig. Reporting to the captain, Hewitt oversaw various aspects of the rig’s operations and supervised 12 to 14 workers. He typically, but not invariably, worked 12 hours a day, seven days a week—so 84 hours a week—during a 28-day “hitch.” He then had 28 days off before reporting back to the vessel.
Helix paid Hewitt on a daily-rate basis, with no overtime compensation. The daily rate ranged, over the course of his employment, from $963 to $1,341 per day. His paycheck, issued every two weeks, amounted to his daily rate times the number of days he had worked in the pay period. So if Hewitt had worked only one day, his paycheck would total (at the range’s low end) $963; but if he had worked all 14 days, his paycheck would come to $13,482. Under that compensation scheme, Helix paid Hewitt over $200,000 annually.
Hewitt filed this action under the FLSA to recover overtime pay. Helix asserted in response that Hewitt was exempt from the FLSA because he qualified as a bona fide executive. The dispute on that issue turned solely on whether Hewitt was paid on a salary basis; Hewitt conceded that his employment met the exemption’s other requirements (the salary-level and duties tests). The District Court agreed with Helix’s view that Hewitt was compensated on a salary basis, and accordingly granted the company summary judgment.
A daily-rate employee like Hewitt is not paid on a salary basis under §602(a) of the Secretary’s regulations. He may qualify as paid on salary only under §604(b). Because Hewitt’s compensation did not meet §604(b)’s conditions, it could not count as a salary. So Hewitt was not exempt from the FLSA; instead, he was eligible under that statute for overtime pay. We accordingly affirm the judgment below.