Supreme Court Approves Overtime for Highly Paid Employee

The United States Supreme Court ruled that an employee who earned over $200,000 per year was paid on a daily rate and was entitled to overtime under the Fair Labor Standards Act (FLSA). The Wage and Hour Division issued a Field Assistance Bulletin providing guidance on ensuring that employees who telework are paid properly under the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA) eligibility rules are properly interpreted for remote workers. The National Labor Relations Board (NLRB) reversed two prior decisions and determined that severance agreements that included a clause prohibiting the disparagement of the employer violated the National Labor Relations Act. President Biden nominated Julie Su, Deputy Secretary of Labor to be the next Secretary of Labor.


Highly Compensated Employee Entitled to Overtime – In a 6 – 3 decision, the United States Supreme Court ruled  that an employee who earned over $200,000 per year was not paid on a salary basis and therefore, was entitled to overtime under the Fair Labor Standards Act (FLSA). Justice Kagan who wrote the majority decision in the case of Helix Energy Solutions Group, Inc. v. Hewitt,  stated “A worker paid by the day or hour—docked for time he takes off and uncompensated for time he is not needed—is usually understood as a daily or hourly wage earner, not a salaried employee. So, in excluding those workers—once again, because they do not receive a preset weekly salary regardless of the number of days worked—the salary-basis test just reflects what people ordinarily think being ‘salaried’ means.”


Michael Hewitt worked for three years for Helix Energy Solutions Group as a “toolpusher” on an offshore oil rig. In this capacity, he oversaw various aspects of the rig’s operations and supervised 12 to 14 workers. He typically worked 12 hours a day, seven days a week or 84 hours per week during a 28-day period. He then had 28 days off before reporting back to the vessel. During his employment, he was paid on a daily-rate basis, with no overtime compensation and his daily rate ranged from $963 to $1,341 per day. He was paid every two weeks with his paycheck consisting of his daily rate times the number of days worked. 


Mr. Hewitt brought this lawsuit seeking overtime compensation under the FLSA claiming that he was not paid on a salary basis. The Supreme Court agreed to review this case to resolve whether a highly paid employee is compensated on a “salary basis” when his paycheck is based solely on a daily rate. In agreeing with the Court of Appeals for the Fifth Circuit, the Supreme Court decided that the employee was not paid on a salary basis and thus was entitled to overtime pay.


Under the FLSA regulations, employees are considered executives and exempt from overtime if they are compensated on a salary basis at a rate of not less than $455 per week, (the salary level test) and carry out three listed responsibilities—managing the enterprise, directing other employees, and exercising power to hire and fire (the duties test). There is a separate rule for highly compensated employees who make at least $100,000 per year and amends only the duties test, requiring that only one of the three responsibilities be regularly performed.


The Supreme Court noted that a daily-rate worker’s weekly pay is always a function of how many days he has labored. It can be calculated only by counting those days once the week is over—not, as §602(a) requires, by ignoring that number and paying a predetermined amount. In requiring that an employee receive a fixed amount for a week no matter how many days he has worked, §602(a) embodies the standard meaning of the word “salary.” The Supreme Court stated that at the time the salary-basis test came into effect, a salary referred to “fixed compensation regularly paid, as by the year, quarter, month, or week.” The Supreme Court observed that the employer could come into compliance by either adding to the per-day rate a weekly guarantee that satisfied the FLSA’s regulations, or it could convert the compensation to a straight weekly salary for the time spent on the rig.


Wage-Hour Division Issues Telework Guidance – The Labor Department’s Wage-Hour Division issued a Field Assistance Bulletin  that provides guidance to its field staff regarding how to ensure workers who telework are paid properly under the Fair Labor Standards Act (FLSA) and how to apply eligibility rules under the Family and Medical Leave Act (FMLA) when employees telework or work away from an employer’s facility. According to the field bulletin, the FLSA requires "When employees take short breaks of 20 minutes or less, the employer must treat such breaks as compensable hours worked regardless of whether the employee works from home, the employer’s worksite, or some other location that is not controlled by the employer." Meal breaks that are longer than 20 minutes during which employees can use the time for their own purposes are not hours worked regardless of where they perform the work.


Concerning FMLA eligibility, an employee must be employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite. For FMLA eligibility purposes, the employee’s personal residence is not a worksite. When an employee works from home or otherwise teleworks, their worksite for FMLA eligibility purposes is the office to which they report or from which their assignments are made. All hours worked are counted for purposes of determining an employee’s FMLA eligibility when an employee teleworks from home consistently or in combination with working at another or various worksites.

Severance Agreements Prohibiting Disparagement of the Employer Violated NLRA – The  National Labor Relations Board (NLRB) issued a decision holding that employers may not offer employees severance agreements that require employees to broadly waive their rights under the National Labor Relations Act. According to NLRB Chair Lauren McFerran, “It’s long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act.” The decision reverses two NLRB decisions issued in 2020 that found similar severance agreements did not violate the National Labor Relations Act (NLRA).

In this case, McLaren McComb, severance agreements were offered in June 2020 to furloughed employees of a hospital in Michigan that prohibited them from making statements disparaging the employer and from disclosing the terms of the severance agreement. According to the NLRB, Section 7 of the NLRA gives individuals the right to join a labor organization, bargain collectively and engage in other concerted activities and the severance agreement in this case required them to give up their rights under this section of the law, resulting in a violation of Section 8(a)(1) of the NLRA which makes it an unfair labor practice for employers “to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights.”  

Julie Su Nominated as Labor Secretary – Julie Su, Deputy Secretary of Labor has been nominated by President Biden to be the next Secretary of Labor and this nomination needs Senate approval.  Marty Walsh announced that his resignation to become the executive director of the National Hockey League Players’ Association.


Neil Reichenberg is the former executive director of the International Public Management Association for Human Resources. He is an attorney, a frequent writer and speaker on public policy and human resource issues, and an adjunct faculty member at George Mason University. For questions or additional information, contact Reichenberg at