The United States Supreme Court has ruled that, despite earning more than $200,000 per year, an employee earning a daily rate is not exempt from overtime pay under the Fair Labor Standards Act.
The 6-3 decision held that the FLSA requires time-and-a-half pay for work over 40 hours a week, even for workers whose compensation far exceeds the minimum wage.
The plaintiff in the lawsuit was paid at least $963 per day (and up to $1,341 per day in some circumstances). The justices ruled that a high-earning employee is not compensated on a “salary basis” when their paycheck is based solely on a daily rate calculated by the number of days worked.
“The Supreme Court’s decision serves as an important reminder to employers that employees who are high earners are not automatically exempt from overtime wages,” said attorney Mark Wallin of the Barnes & Thornburg law firm.
All parts of the test for exemption must be satisfied – salary level (amount), salary basis (consistent unit), and duties (i.e., executive, or administrative), he added. Otherwise, overtime wages must be paid, regardless of how much the employee earns.
Because the employee was not paid on a salary basis, the court ruled that, he could not satisfy the highly compensated employee (HCE) exemption (or any of the white-collar exemptions) under law and as a result is nonexempt and entitled to overtime pay, explains attorney Shira Yoshor of the Greenberg Traurig law firm.
“Employees who are highly compensated but not guaranteed to be paid the same amount every week no matter how many hours they work are likely to be considered nonexempt and eligible for overtime,” she added.
“To ensure compliance, employers should consider reviewing pay practices to determine whether employees earning over $107,432.00 per year are in fact being paid on a salaried basis. If not, employers risk overtime exposure.”
