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Monday, July 24, 2023

NJ Employment Attorney, High "Salary" Employees May Be Entitled to Overtime

The US Supreme Court held earlier this year that certain highly compensated workers making over $200,000 a year, whose employers characterized them as being salaried employees, were not paid on a "salary" basis comporting with regulations, and may still be entitled to overtime pay.

Some employers are cheating their employees out of legal wages by claiming the workers are so highly compensated for their labor and paid by a salary, that the overtime pay legal regulations automatically do not apply to them. As a result, some workers who work grueling exorbitant, and frequently unsafe, hours are paid substandard wages. Congress enacted the Fair labor Standards Act (FLSA) to eliminate both “substandard wages” and “oppressive working hours”. If you think your employer is depriving you of overtime hourly payment, you should contact this office for a free consultation. I have represented private and public employees who suffered from employer wage theft as a result of their being misclassified and was successful in recovering financial compensation for their lost wages.

Employees are exempt from the overtime requirements if they are employed in a bona fide executive, administrative, professional, or outside sales capacity. Certain, but not all, computer professionals are exempt if their job requirements and compensation pass a certain test.

In Helix Energy Sols. Grp., Inc. v. Hewitt, 143 S. Ct. 677 (2023), a worker, Michael Hewitt, who earned more than $200,000 a year as an off-shore oil rigger, filed a lawsuit against his employer, Helix Energy Solutions Group, in which he sought overtime pay under the Fair Labor Standards Act of 1938, (FSLA). The FSLA guarantees overtime pay to covered employees when they work more than 40 hours a week. Hewitt worked for Helix on an offshore oil rig, typically working 84 hours a week while on the vessel for three years from 2014 to 2017. Helix paid him on a daily-rate basis, with no overtime compensation. Hewitt’s paycheck was issued every two weeks and the total amount paid to him was equal to his daily rate times the number of days he had worked in the pay period. Hewitt earned over $200,000 annually under that compensation scheme.

The employer argued that Hewitt was not entitled to overtime protections because he was a "Highly Compensated Employee", and a bona fide executive who was exempt from the FLSA regulations.

An employee is excluded from the FLSA overtime projections if under applicable regulations, the employee is a bona fide executive who meets three distinct tests:

The first test is the “salary basis” test, which requires that an employee receive a fixed predetermined salary that does not vary with the amount of time worked.

The second test is the “salary level” test, requiring that preset salary to exceed a specified amount.

The third test is the job “duties” test.

The Secretary of Labor implemented the “bona fide executive” standard through two separate and slightly different rules:

General Rule: one “general rule” applying to employees making less than $100,000 in annual compensation, and a second rule, the Highly Compensated Employee Rule, “HCE rule”: addressing “highly compensated employees” who make at least $100,000 per year.

The General Rule considers employees to be executives when they are compensated on a salary basis (the salary-basis test) at a rate of not less than $455 per week (salary-level test); and carry out three listed responsibilities under the third test, the duties test, i.e., managing the enterprise, directing other employees, and exercising power to hire and fire. 

The HCE rule for those making at least $200,000 a year, relaxes only the third test, the duties test, while restating the salary-basis test and the salary level test. As litigated in this particular case, whether Hewitt was an executive exempt from the FLSA’s overtime pay guarantee turned only on whether Hewitt was paid on a “salary basis”.

This case wound its way up to the US Supreme Court as follows, starting with the District Court: The District Court agreed with the employer Helix’s argument that employee Hewitt was paid on a salary basis and found for the employer. The Court of Appeals for the Fifth Circuit reversed, deciding that Hewitt was not paid on a salary basis and he could claim the FLSA’s overtime’s protections. The Appeals court decided this based on its examination of the two regulations that give content to the salary-basis test.

First, the Appeals Court concluded that a daily-rate employee (like employee Hewitt) does not fall within the main salary-basis provision of §541.602(a), which states:

“An employee will be considered to be paid on a ‘salary basis’ . . . if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to [certain exceptions], an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.”

Second, the Appeals Court held that “daily-rate” workers can qualify as paid on a salary basis only through the “special rule” of §541.604(b), which addresses pay for workers whose compensation is computed on an hourly, a daily or a shift basis. Because employee Hewitt’s compensation did not satisfy §604(b)’s conditions, the Court concluded that employee Hewitt, although paid over $200,000 a year, was not exempt from the FLSA overtime protections.

The Appeals Court found that employee Hewitt was not an executive exempt from the FLSA’s overtime pay guarantee; because daily-rate workers, of whatever income level, pass the “salary basis test” only if the conditions set out in §541.604(b) are met.

The US Supreme Court affirmed and found for the employee Hewitt, that he was entitled to overtime pay although he was compensated at more than $200,000 a year. Justice Kagan delivered the opinion of the Court:

“The Fair Labor Standards Act of 1938 (FLSA) guarantees that covered employees receive overtime pay when they work more than 40 hours a week. But an employee is not covered, and so is not entitled to overtime compensation, if he works “in a bona fide executive, administrative, or professional capacity,” as those “terms are defined” by agency regulations. 29 U. S. C. §213(a)(1). Under the regulations, an employee falls within the “bona fide executive” exemption only if (among other things) he is paid on a “salary basis.” 29 CFR §541.100(a)(1) (2015); see §541.601(b)(1). Additional regulations elaborate on the salary-basis requirement, as applied to both lower-income and higher-income employees.

The question here is whether a high-earning employee is compensated on a “salary basis” when his paycheck is based solely on a daily rate—so that he receives a certain amount if he works one day in a week, twice as much for two days, three times as much for three, and so on We hold that such an employee is not paid on a salary basis, and thus is entitled to overtime pay......

A daily-rate employee like Hewitt is not paid on a salary basis under §602(a) of the Secretary’s regulations. He may qualify as paid on salary only under §604(b). Because Hewitt’s compensation did not meet §604(b)’s conditions, it could not count as a salary. So Hewitt was not exempt from the FLSA; instead, he was eligible under that statute for overtime pay. We accordingly affirm the judgment below.

            It is so ordered.”

If You Quit Your Job, You May Lose Right to Prevail in a Lawsuit

If you are thinking of quitting, or think you will be fired, you should contact this office immediately for a free consultation to discuss your options in the safest way for you. In many instances of discrimination, if you quit your job, you may lose right to prevail in a lawsuit unless you first take certain legally required measures to preserve your job while you are still employed.

Let Me Fight for You

I am successful in bringing employee lawsuits against governmental entities and private employers and recovering money for victims of illegal payment under wage and hour laws, retaliation and other discrimination. If you have been fired, not had your contract renewed, think you are not being paid your full wages, or being pushed out of your job or retaliated against, you should contact this office immediately for a free consultation.

Hope A. Lang, Attorney at Law represents workers throughout the entire state, including Hackensack, Jersey City, Newark, Irvington, Orange, East Orange, Trenton, Paterson, Montclair, Elizabeth, North Brunswick, Cherry Hill, Vineland, Union, Plainfield, Hamilton Township, Lakewood, Edison, Parsippany-Troy Hills, Franklin, Lakewood, and in every NJ County, including Bergen, Hudson, Middlesex, Essex, Monmouth, Somerset, Ocean, Union, Camden, Passaic, Morris, Gloucester, Atlantic, Burlington, Camden Counties.

 


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