The Elusive Salary Basis Requirement

​Much attention has been paid to the minimum salary and exempt duties required to be exempt under a white-collar exemption from the Fair Labor Standards Act’s (FLSA’s) overtime requirement. However, the salary basis requirement must be satisfied as well.

Under the FLSA, for an employee to be exempt from overtime under a white-collar exemption, three requirements must be met:

• The employee’s primary duties must be exempt in nature.
• The employee must be paid at least the minimum salary as set by the U.S. Department of Labor.
• The employee must be paid on a salary basis. 

Most litigation, as well as legal ­education, has focused on the first two requirements. However, the third requirement—that the employee be paid on a salary basis—is just as important, a lesson that one employer learned the hard way earlier this year, courtesy of the U.S. Supreme Court.

Supreme Court Emphasized Plain Text in Ruling

The case,

Helix Energy Solutions Group Inc. v. Hewitt, involved a highly compensated employee who earned between $963 and $1,341 a day. During the relevant time period, the minimum salary to be exempt under the FLSA was only $455 per week.

On any given day, the ­employee earned more than double the then-minimum salary requirement of $455 per week. Even so, the Supreme Court held that the employee was not paid on a salary basis, and therefore, was not exempt from overtime.

To reach this conclusion, the court explained there are two “nonoverlapping ways” an…