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March 2023: US Supreme Court Rules Employee Earning $200,000 per Year is Non-Exempt

08 Mar

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Update Applicable to:
All employers

What happened?
On February 22, 2023, the Supreme Court held that high-earning professionals must be paid on a salary basis to qualify for overtime-exempt status under the Fair Labor Standards Act (FLSA).

What are the details and what should you do?
Relevant Department of Labor regulations states that highly compensated employees are exempt from overtime pay requirements if:

  1. The employee earns total annual compensation of US$107,432 or more, which includes at least US$684 per week paid on a salary or fee basis;
  1. The employee’s primary duty includes performing office or non-manual work; and
  1. The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.

In Helix Energy Solutions Group, Inc. v. Hewitt, the Supreme Court found that Helix Energy Solutions Group Inc. violated the FLSA by classifying an employee who earned over US$200,000 per year as overtime-exempt but calculated his pay daily rather than on a salary basis. Although the employee made well over US $107,432 in a year and met the second and third requirements of the above test, the Supreme Court held that the employee was nevertheless not exempt under the FLSA, and thus entitled to overtime pay, because his annual compensation did not include “at least $684 per week paid on a salary or fee basis.”

Employers should not interpret this ruling to mean that all highly compensated executives are now overtime eligible. Rather, as long as such employees are compensated on a salary basis (which the vast majority are) and meet the other requirements, the Supreme Court ruling would not require an employer to pay them overtime.

Although this ruling may have limited applicability to most employers, it is always prudent to regularly review employment classifications when new guidance or decisions are issued.

For more information, please see the links below:

Helix Energy Solutions Group, Inc. v. Hewitt

DOL RegulationsArticle 1Article 2Article 3

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