Only "True Salaried" Lawyers Are Overtime-Exempt

In Helix Energy Solutions Group, Inc., et al. v. Hewitt, the Supreme Court held that high-earning professionals such as lawyers can only be overtime-exempt if paid a salary. The question of whether a high-earning employee works on a “salary” depends on whether the employee’s “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.” As the Court explained, a “true salary” is “a steady stream of pay, which the employer cannot much vary and the employee may thus rely on week after week.”

The Background Of Helix v. Hewitt

Hewitt was a high-ranking supervisor on Helix’s offshore vessels. Every two weeks, Helix paid him at least $963 for each day that he worked. In all, Hewitt earned $248,053 in 2015, $218,863 in 2016, and $143,680 in the eight months he worked for Helix in 2017. After his performance-related release, Hewitt sued Helix under the Fair Labor Standards Act (“FLSA”), claiming that he was also entitled to substantially more in retroactive overtime pay.

On appeal from the trial court’s decision, a divided Fifth Circuit ruled that Hewitt was non-exempt and entitled to retroactive overtime pay because he was paid based on a daily rate, not a weekly rate, even though his daily rate was more than twice the weekly minimum. On appeal from the Fifth Circuit’s decision, the Supreme Court rejected this position.

The Supreme Court held that Hewitt was not an executive exempt from the Fair Labor Standards Act’s overtime pay guarantee because daily-rate workers, of whatever income level, qualify as paid on a salary basis only if the conditions set out in 29 C.F.R. § 541.604(b) are met.

Complying With 29 C.F.R. § 541.604(b)

29 C.F.R. § 541.604(b) sets out the conditions that must be met for an employee to be considered paid on a “salary basis” and thus potentially exempt from the FLSA’s overtime pay requirements. These conditions include:

The employee must receive a predetermined and fixed salary that is not subject to reduction based on the quality or quantity of work performed.
The employee’s salary must meet a minimum threshold, which is currently set at $684 per week (as of January 1, 2021).
The employee’s salary must be paid on a weekly, bi-weekly, or monthly basis.
The employee’s salary must be paid regardless of the number of days or hours worked in a workweek.
The employee’s salary may be reduced for certain reasons, such as for full-day absences for personal reasons or illness, or for disciplinary suspensions of one or more full days for workplace conduct rule violations.

If all of these conditions are met, then an employee may be considered exempt from the FLSA’s overtime pay requirements as an “exempt” employee. This category obviously covers many associate attorneys, who work long hours. However, even if an employee meets these conditions, there are other requirements that must be met for an employee to be considered exempt under the FLSA, such as meeting the “duties test” for executive, administrative, or professional employees. Contact us to learn more.

Please note that the information provided on this website is for general informational purposes only and is not intended as legal or tax advice. The information is subject to change, and it is important to consult a specialist before making any decisions. Law Ledgers provides accounting services to New York lawyers and law firms, including escrow protection, tax advice and bookkeeping administration. Contact us today for personalized support.