Even Highly Paid Employees May Be Entitled To Overtime Compensation

By way of background, employees generally are entitled to one and one-half times their regular hourly rate of pay for hours worked in excess of forty hours per week – unless they are “exempt” from overtime under one of the exemptions to the law. In Helix, the company considered Mr. Hewitt exempt pursuant to the highly compensated employee exemption and, therefore, did not pay him overtime. Mr. Hewitt made over $200,000 per year in his job, working on an oil rig as a “tool pusher.”

Under the Fair Labor Standards Act (FLSA), even an otherwise non-exempt employee can be exempt from overtime if the employee receives a total annual salary of $107,430 – which includes compensation of at least $684 per week – and provided the employee’s primary duties include performing office or non-manual work and the employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional.

The question in the Helix case was whether Mr. Hewitt truly was paid on a salary or fee basis. Mr. Hewitt worked on what is known as a day rate structure in which he was paid $963 per day for each day he worked (which is higher than the FLSA’s per week requirement of $684). Mr. Hewitt argued that he was not truly paid a salary because he had other requirements that were more typically hourly such as he was not permitted to take a partial day off without losing compensation. The Supreme Court agreed with Mr. Hewitt.

This case is a reminder to employers that simply because an employee is “highly compensated” does not mean that the employee is exempt under federal law. Such an employee, like every other employee, must meet all of the requirements under at least one of the exemptions under the FLSA to not be entitled to overtime.

The consequences for misclassifying an employee can be significant. The penalties for violating the FLSA can be as much as three years of the unpaid overtime pay, liquidated damages equal to double that amount, as well as any reasonable attorney’s fees and costs the employee incurs. Further, if the decision to not pay overtime was part of a custom and practice that applied to other similarly situated employees, the claims for unpaid overtime may be brought as a collective action that, if successful, could drastically increase an employer’s liability.

Any employer who has any question or concern about whether a certain position and/or employee is exempt or non-exempt should consult experienced labor and employment counsel.

Author Chuck Ercole is a partner in the labor & employment practice group at Klehr Harrison.