On Wednesday, the Supreme Court ruled in Helix Energy Solutions Group, Inc. v. Hewitt that an employee who earned more than $200,000 a year was not exempt from overtime pay under the FLSA’s highly compensated employee exemption.

The highly compensated employee exemption applies to employees who meet all the following criteria:

• Perform office or non-manual work;
• Receive total annual compensation of $107,432 or more, which must include at least $684 per week paid on a salary basis; and
• Customarily perform at least one of the duties of an exempt executive, administrative, or professional employee.

The Court’s decision in Helix hinged upon the “salary basis” test set forth in the FLSA regulations. In summary, an employee is paid on a salary basis if he or she receives a predetermined and fixed payment on a weekly or less frequent basis that does not vary with the quality or quantity of work.

In Helix, although the employee was very highly compensated, he was paid a daily rate, meaning that he was paid only for days on which he worked, and he was never guaranteed a minimum weekly pay. In contrast, an employee paid on a salary basis is guaranteed his or her entire salary for any week in which work is performed, regardless of how many days the employee worked that week. The Court explained that although the employee in Helix received his paycheck every two weeks and the paycheck exceeded the salary level required by the exemption, this was not sufficient to meet the exemption, and he was entitled to overtime pay.

The Helix case is an important reminder to employers to review their job descriptions and pay practices to ensure all elements of the FLSA exemptions are met. Employers are encouraged to consult with counsel for assistance in performing regular FLSA audits.