While most jobs pay weekly or biweekly, there are some positions that pay a daily rate. This may be the case for labor-intensive jobs as well as temporary workers.
Because paying employees a daily rate is somewhat atypical, employers may not know the specifics when it comes to the legalities of overtime for daily rate employees. Are employees paid at a daily rate eligible for overtime? Below, we dive into the details.
All highly compensated employees are not salaried nor are they per se ineligible for overtime, as some employers believe. In February, the Supreme Court ruled that highly compensated employees who are paid on a daily basis can still qualify for overtime. The case clarifies overtime exemptions under the Fair Labor Standards Act (FLSA).
In the case of Helix Energy Solutions Group v. Hewitt, the Supreme Court ruled 6-3 that a former employee was eligible for overtime pay despite being paid on a daily basis and earning more than $200,000 a year. The court ruled that Helix Energy Solutions Group, an offshore oil and gas company based in Houston, did not pay a salary as defined under the FLSA. Therefore, their employee was not exempt from overtime pay.
Even though the employee in this case was very well-paid, the court denied the employer the overtime exemption based on a technical reading of the regulations. Employers must ensure their payment practices are compliant with the FLSA. However, most employers will find they do not have to change their practices due to the court’s ruling.
The case involved the oil and gas company and a former employee. The company claimed the man was exempt from overtime pay because he was a highly paid executive, earning more than $200,000 per year. According to Helix, the employee did not qualify for overtime pay because he received at least $455 each week and therefore met the minimum standard for salaried workers at the time.
However, the man claimed he should get retroactive overtime pay because the company calculated his pay using a daily rate. Between 2015 and 2017, the man worked 28-day “hitches.” He lived on an offshore oil rig for 28 days at a time and was on duty for 12 hours each day. He typically worked about 84 hours per week. The man’s pay ranged from $963 to $1,341 per day. He earned $248,053 in 2015 and $218,863 in 2016.
The court found that the salary basis requirement is met when employees are paid by the week or longer. Daily pay, which is how the man was paid, does not apply in this case. While the man did not technically receive his pay on a daily basis, his pay was calculated on a daily basis. Therefore the man was eligible for 1.5 times his regular rate for the hours that exceeded 40 hours in a single week, which amounts to approximately $52,000 for a year’s worth of overtime wages.
A guaranteed weekly amount is always a critical requirement for satisfying the salary basis test.
The court said the company could have met the salary basis requirement either by adding a weekly guarantee to the worker’s per-day rate or by converting the worker’s pay to a weekly salary.
So, who is exempt from overtime? Employees who earn a fixed salary of at least $684 per week and perform executive, administrative, or professional work qualify for an overtime exemption. It is not the employee’s job title that determines exempt status but the duties they perform and the method of pay.
To be considered an executive, a person must manage the business or a recognized subdivision thereof, direct the work of two or more full-time employees, and hire or fire other employees. The man in the Helix case was considered an executive.
To be considered an administrative employee, the employee must perform office or non-manual work directly related to general business operations, and must exercise independent discretion and judgment with respect to matters of significance. To qualify as a professional employee, a person must do work that requires advanced knowledge. Their advanced knowledge must be in a field of science or learning. Creative professionals must primarily do work that requires invention, imagination, talent, or originality.
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While FSLA laws continue to trip employers up, particularly when it comes to overtime compliance. Even though it may not be typical for highly compensated employees to be paid on a daily basis, this case underscores the importance of staying vigilant when it comes to federal labor laws.
If you need help with any employment or business law matter, the Frisco employment lawyers at Simon | Paschal PLLC can help. Schedule a consultation today by calling (972) 893-9340 or contacting us online.