On Wednesday, in a 6-3 decision, the U.S. Supreme Court affirmed a lower court decision finding that a highly compensated employee who was paid a day rate did not qualify as exempt from the overtime requirements of the Fair Labor Standards Act (FLSA). In Helix Energy Solutions Group, Inc. v. Hewitt, the plaintiff was a manager for an energy company, who worked on oil rigs and made over $200,000 per year. As is common in that industry, employees are paid on a day rate basis for the time spent on the rigs. The plaintiff sued, claiming that because he was not paid on a salary basis, he did not qualify for the FLSA’s executive exemption.

The employer argued that as a highly compensated employee, the FLSA allows day or shift-based pay as long as the total compensation exceeds the minimum under that regulation. The Court disagreed, finding that payment on a day-rate basis did not meet the FLSA’s weekly salary requirement. The plain meaning of the underlying statutory language requires this result even if it results in payment of overtime to an employee who made well in excess of the minimum amount required to claim the executive exemption.

The FLSA was adopted in the 1930s, and the white collar exemption regulations trace their roots to the 1950s. These wage rules did not take into account the subsequent wide diversification of the U.S. economy, and the resulting pay systems that adapted to individual business circumstances. Regardless, the Supreme Court’s decision sends a clear signal to employers that any changes to these baseline requirements for exempt status will require amending the FLSA.

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