Wage&Hour

Highly Compensated Employee Gets FLSA Overtime Because He Was Not Paid On A Salary Basis.

From 2014 to 2017, Michael Hewitt worked for Helix Energy Solutions Group on an offshore oil rig. Hewitt typically worked 12 hours a day, 7 days a week for 28 days. He would then have 28 days off. Hewitt oversaw various aspects of the rig’s operations and supervised 12-14 workers. Hewitt’s pay consisted of his daily rate (about $1,000 a day) multiplied by the number of days he worked. So, if Hewitt worked only one day in the work week, he received about $1,000 a week. If Hewitt worked seven days in the work week, he received about $7,000 that week. He was not paid overtime. This pay arrangement computed to over $200,000 a year.

Hewitt sued Helix seeking overtime pay under the Fair Labor Standards Act (FLSA). The issue was whether Helix had paid Hewitt on a salary basis. If not, Hewitt would be entitled to overtime pay. The FLSA guarantees that covered employees receive overtime pay when they work more than 40 hours a week. But, an employee is excluded from overtime pay requirements, if he works “in a bona fide executive, administrative, or professional capacity,” as defined in the FLSA regulations. The regulations allow an employer to exclude an employee from overtime pay if the employee: 1) is paid on a “salary basis”; 2) is paid at least $455 a week (that minimum amount is now $684 a week); and 3) performs high-level job duties that fall into at least one of several regulatory categories.

Still another way an employer can exclude an employee from overtime is under another FLSA regulation regarding highly-compensated employees (HCE) who make more than $100,000 a year. Under the HCE regulation, there is a higher income threshold and a shortened list of required duties, but the salary basis rule remains the same.

The FLSA regulations give an employer two general options for paying an employee on a “salary basis”: 1) pay the employee a predetermined amount of pay every work week, even if the employee only works part of that work week (29 CFR Section 541.602(a)); or 2) pay the employee an hourly, daily or shift rate that is guaranteed to be no less than $455 (now $684) a week regardless of the number of hours worked, and the guaranteed amount must be roughly equivalent to the usual earnings for the employee’s normally-scheduled work week. (29 CFR Section 541.604(b)).

Justice Kagan explained that these FLSA salary test regulations “create a compensation system functioning much like a true salary—a steady stream of pay, which the employer cannot much vary and the employee may thus rely upon week after week.”

Helix acknowledged that Hewitt’s compensation did not meet the second option under the FLSA regulation 29 CFR Section 541.604(b). Thus, the Court focused on whether Helix paid Hewitt on a salary basis under the first option described in the FLSA regulation at 29 CFR Section 541.602(a).)

The Court decided Hewitt was not paid on a salary basis. This is because the amount of his pay was subject to reduction because of variations in the quantity of work he performed each week. The Court noted that a daily-rate worker’s weekly pay is always a function of how many days the worker has labored; as a result, the weekly pay is not a predetermined amount. A salaried employee, conversely, receives at least his or her same salary for any week in which any amount of work is performed. Hewitt, however, would only receive his salary pro-rated to how many days in the pay period he worked.

Hewitt, therefore, was a non-exempt employee entitled to overtime compensation.

Helix Energy Solutions Group, Inc. v. Hewitt (U.S., Feb. 22, 2023, No. 21-984) 2023 WL 2144441.

Note:

This case illustrates the high stakes involved in FLSA overtime-exemption cases. This employer appeared to believe that paying a high wage would mean it was not required to pay overtime pay. This employer’s mistaken belief resulted in a back pay award of thousands of dollars.

School’s Failure To Timely Pay Wages Early In COVID-19 Pandemic Results In FLSA Claim.

In 2005, Lisa Rosenbaum was hired as a secretary, a non-exempt position, at Bais Yaakov Drav Meir, a private elementary school in New York.

On March 18, 2020, the School temporarily closed due to the COVID-19 pandemic. The School paid Rosenbaum her weekly wages for the work weeks ending on March 20 and March 27, 2020. On April 5, 2020, the School did not pay Rosenbaum, so she contacted the School. The School then paid some but not all of her wages for that week. On April 21, 2020, Rosenbaum filed for unemployment for the weeks of April 10 and 17. On April 26, 2020, Rosenbaum worked at the School from 9:00 A.M. to 4:00 P.M., handing out books to students and taking phone calls from parents to coordinate remote learning.

The School’s bookkeeper told Rosenbaum that the School was working to correct the payroll issues to provide Rosenbaum with her outstanding wages. On May 8, 2020, the School provided Rosenbaum with her past-due wages, but did not include a check for her wages due for the workweek ending in May 8, 2020, and failed to remit the paychecks due on May 15 and May 22. Rosenbaum contacted the School to complain about her unpaid wages. The School said they would deliver the outstanding wages and told Rosenbaum that the outstanding wages would be paid less the amount Rosenbaum received through unemployment.

On June 8, 2020, after still not receiving her outstanding wages, Rosenbaum called the School and the School administrator berated Rosenbaum about her complaints regarding her unpaid wages, told her that she “unemployed herself” as a result of her complaints, and ultimately terminated her employment.

In September 2020, Rosenbaum filed suit asserting retaliation under the Fair Labor Standards Act of 1938 (FLSA). In October 2020, after the School was served with the summons and complaints, the School’s bookkeeper called Rosenbaum and encouraged her to settle the matter in Rabbinical Court. Rosenbaum said she was proceeding in secular court. Allegedly, the bookkeeper threatened Rosenbaum and reminded her that she had “children to marry off,” a warning suggesting that Rosenbaum’s pursuit of her claims in secular court would result in other people in the community refusing to marry her children. A couple of days later, the School administrator emailed Rosenbaum to schedule a time for the parties to appear before the Rabbinical Court. Rosenbaum’s counsel notified the School that she declined to consent to appear in Rabbinical Court.

In November 2020, the School filed a new action in Rabbinical Court, which contained a note that Jewish individuals are forbidden to litigate in secular courts without consent of the Rabbinical Court.

The School filed a motion to dismiss in secular court, arguing that Rosenbaum’s claims about payment of wages fail under the FLSA and New York law because Rosenbaum did not perform any work during the relevant period; and her retaliation claims fail under the FLSA and New York law because Rosenbaum was not involved in any protected activity.

Concerning the prompt payment of wages, the School argued that once the School closed due to the pandemic, Rosenbaum only performed work on one day, April 26, 2020. The Court noted that the School is required to pay employees at least the minimum wage in any workweek where they perform work. The FLSA does not specify when the wage must be paid, but courts have long interpreted a prompt payment requirement, and late wages are considered a form of unpaid wages. The Court found that Rosenbaum’s complaint sufficiently plead facts in support of her claims, in that it detailed how the School missed payments on multiple occasions without any legitimate business reason, and these late or missed payments were unreasonable.

For her retaliation claim, Rosenbaum argued that the School violated the FLSA’s and New York law’s antiretaliation provisions after she filed the instant action. The Court found that Rosenbaum sufficiently plead that the School failed to promptly pay her wages, in violation of the FLSA, that Rosenbaum subsequently instituted this action, and, as a result, the School initiated adverse employment actions towards Rosenbaum. Rosenbaum’s complaint states that she informed the School she was pursuing the FLSA claims in federal court, and the School terminated her employment and withheld her outstanding wages owed. The School threatened her family’s future within the Jewish community by proceeding with the action in Rabbinical Court, which Rosenbaum argues will likely have the effect of permanently tarnishing her reputation within the Jewish community. The Court found that Rosenbaum alleged sufficient facts to assert a plausible retaliation claim under the FLSA and New York law.

The Court denied the School’s motion to dismiss.

Rosenbaum v. Meir (E.D.N.Y., Mar. 1, 2023) 2023 WL 2305960.

Note:

This case shows the importance of timely paying wages to employees and is a reminder that employees can bring retaliation claims against a school under the FLSA.