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As I continue to work with small and midsize companies in helping them mitigate risk, the understanding of who is considered exempt or non-exempt under the Fair Labor Standards Act continues to be an issue.

A recent U.S. Supreme Court decision regarding the difference between non-exempt, or eligible for overtime, and exempt provides me a good opportunity to again discuss the basics of wage and hour law under the FLSA .

The country’s High Court ruled on February 22, 2023 in Helix Energy Sols. Grp., Inc. v. Hewitt (“Hewitt”) that even high six-figure earners must be paid a guaranteed weekly salary and not just paid day rates.

Under the FLSA, employers claiming “white collar” exemptions must satisfy three tests in order to avoid paying overtime: 1) the “salary basis” test, requiring payment of a salary regardless of the quantity or quality of the employee’s work, 2) the “salary level” test, requiring payment of a preset salary above the set minimum threshold (which is currently $684 per week under the FLSA), and 3) the job “duties” test.

In the Hewitt case, the Supreme Court found the employer failed to meet the “salary basis” test for the job in question. The employer ran offshore oil rigs, and Mr. Hewitt typically worked 84 hours each week while on a rig. He earned over $200,000 each year. The employer paid Mr. Hewitt on a daily-rate basis without paying overtime. He therefore was paid the daily rate times the number of days he worked in each two-week pay period. Since his pay varied depending on the number of days he worked each week, the Court found that he was not paid a “salary,” and therefore his job did not pass the “salary basis” test and the employer owed him overtime.

OK, so this was a bit outside the norm of a typical “non-exempt” role under the FLSA.  Many of the jobs I review are not nearly as complicated as this one.

I have seen many cases of misclassified workers:

  • A store manager, earning $32,000/year, classified as exempt
  • A business paying everyone, including a mechanic, a salary, because it was “easier to manage”.
  • Paying an admin assistant more than $684/week just so you can make the person “exempt”
  • Making an IT technician exempt because they are making over $90,000/year, which is “a lot of money…I’m not paying them overtime on top of that!” said the business owner.
  • Not paying an exempt employee for a personal day because they did not give advanced notice.
  • Not paying an exempt employee when the office closed for a three day holiday break.

Companies should consider contacting Marzano Human Resources Consulting to review their job descriptions and ensure compliance with the five exemption tests under the FLSA.  With federal, state and local employment laws becoming more and more difficult to navigate, businesses should consider having us do a full-scale Human Resources audit.

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