Supreme Court: Hourly and Daily Rate Workers are Not Exempt and are Owed Overtime

The Supreme Court ruled on February 22nd, 2023 that workers earning daily rates are not exempt salaried workers and are therefore owed overtime.  The case was brought by an offshore oil rig worker who was paid daily rates and was listed as a “bona fide executive” earning over $200,000 a year.  The federal district court ruled that the worker was exempt.  The Fifth Circuit Court of Appeal overturned the decision, ruling that the Federal Labor Standards Act (“FLSA”) did not allow day-rate or daily-rate workers to be considered the equivalent of salaried workers.  The Supreme Court affirmed, 6-3, and held that daily-rate workers are entitled to overtime notwithstanding their executive job titles or high earnings.   

Daily Rate is Not a Salary Regardless of Total Earnings 

The Supreme Court held that workers who earn on a “day rate” or “daily rate”, which means they are paid a flat amount per day, cannot be considered exempt.  The Supreme Court noted that the bi-weekly paychecks were paid by multiplying the oil worker’s daily rate by the number of days worked during the pay period. Even though the worker held an executive title and earned $200,000 per year, the Court found that the variable earnings based on days worked excluded the worker from being considered exempt. From the ruling: 

“The question here is whether a high-earning employee is compensated on a ‘salary basis’ when his 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… We hold that such an employee is not paid on a salary basis, and thus is entitled to overtime pay”. 

The Federal Labor Standards Act 

The FLSA provides a minimum wage, overtime for hours worked beyond 40 hours in a week, recordkeeping rules, and restrictions on child labor, among other worker protections and labor rules. The law has been amended several times since its enactment in 1938. 

Overtime and Exemption 

Under federal law, a worker is entitled to “time and a half” overtime pay if he/she works more than 40 hours per week.  Many states provide additional overtime pay. Workers in California, for example, are entitled to “time and a half” overtime pay for hours worked in excess of 8 hours per day, or double overtime for hours worked in excess of 12 hours per day.   

An exempt worker does not accrue overtime or double time for additional work.  Workers must be salaried to be exempt.  The issue in this case was whether daily-rate pay is considered a salary.  The Fifth Circuit, and now the Supreme Court, have ruled it cannot. 

Unpaid Overtime 

If you believe you are not being paid for all of the time you have worked, or are not being paid the overtime due to you, we invite you to schedule a consultation with an employment law attorney in our California, Texas, North Carolina or Puerto Rico offices. Schneider Wallace Cottrell Konecky LLP is a national law firm that represents employees in a wide range of employment law cases, including class action lawsuits involving the failure to pay wages, overtime pay and commissions. Contact us at 1-800-689-0024.