Who is entitled to overtime? A new Supreme Court decision puts employers on notice

CFOs are concerned about compliance risks. And at a time when talent, pay, and compensation are top of mind, the highest court in the U.S. is weighing in on employment laws. 

“Frankly, every employer should review their wage and hour compliance on a fairly regular basis because the laws are complicated, as evidenced by this Supreme Court decision; and the laws are subject to different interpretations and change,” says Alex Granovsky, a labor and employment attorney at Granovsky & Sundaresh PLLC.

The Supreme Court ruled on Feb. 22 that Michael Hewitt, a “tool-pusher” at Helix Energy Solutions, an oil and gas company based in Houston, who earned more than $200,000 a year, still qualified for overtime pay under the Fair Labor Standards Act (FLSA).

The court sided with Hewitt in a 6-3 vote. From 2014 to 2017, Hewitt worked for Helix on an offshore oil rig, about 84 hours a week. He supervised 12 to 14 workers and was paid from $963 to $1,341 per day. But Hewitt didn’t receive any overtime pay.

The more than $200,000 was Hewitt’s total compensation. He wasn’t paid a salary, but was paid a day rate, Granovsky explains. The more days he worked, the more money he made, and vice versa. “In a lot of ways, if you think about it, that’s almost identical to being paid an hourly rate,” Granovsky says.

The issue that was “teed up” for the Supreme Court was “whether or not this employee, by being paid well over $200,000 a year, and being paid a day rate, met the FLSA’s executive exemption for overtime,” he explains.

Employees exempt from the FLSA overtime rule typically must be paid a salary above a certain level and work as a “bona fide executive” (satisfying salary and duty requirements), administrative, or professional role. In the case of Hewitt, Justice Elena Kagan wrote in her opinion that Helix paid him by the day and not weekly. This did not meet the FLSA’s salary-based criteria for an executive exemption. Kagan wrote that the exemption at issue “applies solely to employees paid by the week (or longer); it is not met when an employer pays an employee by the day, as Helix paid Hewitt.”

So, what are some of the implications for companies regarding the court’s decision? “Anything other than an actual salary, where you are paid the same, irrespective of the quality or quantity of your work, will not suffice for the purpose of an employee being exempt,” Granovsky explains. The crux of Hewitt’s employer’s argument was the amount of money he made, but that’s “irrelevant,” he says. “It’s the manner in which you are paid,” Granovsky says.

A new paper by the National Bureau of Economic Research argues there’s evidence of “an almost five-fold increase” in listings for salaried positions with managerial titles by firms seemingly in an attempt to avoid paying overtime wages. This includes “the listing of managerial positions such as ‘directors of first impression,’ whose jobs are otherwise equivalent to non-managerial employees (in this case, a front desk assistant),” according to the report. 

Regarding employment law, what should CFOs keep on their radar for 2023? “The severance agreements that came down from the National Labor Relations Board (NLRB); that’s a big one,” Granovsky says. On Feb. 21, the NLRB ruled that employers may not offer severance agreements that require employees to broadly waive labor law rights. 

“But the wage and hour is a very sticky issue because there’s a lot of gray areas,” he says. “When it comes to the Fair Labor Standards Act, a failure to maintain accurate records of wage payments and hours worked and things like that can really hurt an employer.”

Compliance is certainly a big deal.

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

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Big deal

International Workplace Group (LSE: IWG), a major provider of flexible workspace, conducted a pulse survey of workers and how much they value hybrid work. According to survey data IWG provided to Fortune, about a quarter (24%) of those making more than $150,000 or more would give up more than $40,000 of their salary to keep their hybrid work arrangement. Meanwhile, 21% of those who earn $100,000-$149,000 would give up $20,000. And 16% of those making $50,000-$99,000 would give up $5,000. IWG’s commissioned survey was conducted by Mortar Research earlier this month of 1,015 U.S.-based hybrid workers. The survey also found that generations value hybrid work differently. Twenty-two percent of millennials and Gen Zers would be willing to give up 31-40% of their salary to keep a hybrid work arrangement, none of the baby boomers or Gen Xers said the same. However, 25% of baby boomers and 21% of Gen Xers would give up 1-10% of their salary. Another finding is 46% of hybrid workers believe that friendships play a key factor in choosing to stay at a company.

Going deeper

A new report by the World Economic Forum, "Digitizing the City: How the UK's financial system is scrapping paper," takes an interesting look at how digitization is being used by the UK government to ensure London's position as a global financial center. "From enhancing shareholder democracy to digitizing shares, the UK has been handed a once-in-a-generation opportunity to strengthen its competitiveness as a capital-raising center," according to the report.

Leaderboard

Antonio Calisto Pato was named CFO at SPAR Group, Inc. (Nasdaq: SGRP), a global provider of services to retail and consumer goods companies, effective Feb. 27. Most recently, Pato served as CFO for Earth Shoes and interim CFO for StreetTrend. Before these roles, he held increasing leadership positions at Chiquita Brands International from 2011 to 2021. He also held financial and business leadership roles at Cemex in Switzerland and PwC in Luxembourg.  

Mike Spiegel was promoted to CFO at C. Mondavi & Family, a Saint Helena-based wine company founded in 1943. Previously, Spiegel served as controller. C. Mondavi & Family's entire portfolio will fall under Spiegel’s financial control, including Charles Krug, Napa Valley's culture hub and California's first tasting room, CK Mondavi and Family, Flat Top Hills, French Blue, West + Wilder, and Valdo Prosecco. Spiegel has over 30 years of experience in finance and accounting. Before joining the company, Spiegel worked with Moss Adams CPA, Fremont Group, and DuMOL Winery.

Overheard

"If you’re the sort of person who seeks out new challenges, or you’re at a point where you want to change the current trajectory of your career, or even someone who wants to align your work and personal life more deeply, you can’t internalize your problems. The people who push it down are the ones who ultimately let their frustration show in other places. Instead, carefully and strategically use the energy of your ambition to get on the right path for the next opportunity."

—Anne Chow, the former CEO of AT&T Business, wrote in a Fortune opinion piece about what to do when your career feels like it’s stagnating. Chow is lead director on FranklinCovey’s board of directors, a director of 3M, and co-author of The Leader’s Guide to Unconscious Bias.