02 May 2023

Form Matters: Are Your Highly Compensated Employees Actually Exempt Under the FLSA?

Under the Fair Labor Standards Act (FLSA), most employees in the United States must be paid at least the federal minimum wage and overtime pay for hours worked over 40 in a workweek. However, there are some exceptions, including an exemption for highly compensated employees.

Under the FLSA, one is a highly compensated employee if it satisfies the duties test and the salary test.  To satisfy the duties test, the employee’s primary duty must include performing office or non-manual work and the employee must customarily and regularly perform at least one of the duties or responsibilities of an exempt executive, administrative or professional employee.

To satisfy the salary test, the employee must earn at least $107,432 annually, including at least $648 per week paid on a salary basis. In most cases it is not difficult to calculate an employee’s annual and weekly compensation to determine whether it totals at least $107,432 and $648, respectively. This test sounds simple enough, right? Despite it being simple, what many employers might overlook and what a recent United States Supreme Court decision confirmed, is that form matters.

In Helix Energy Solutions Group Inc. et al. v. Hewitt, the Supreme Court held that an employee must be paid a salary in order to qualify for the highly compensated employee exemption. The employee in that case was compensated a daily rate of $984, totaling over $200,000 annually. Thus, as long as he worked at least one day per week, he earned more than the minimum $648 weekly FLSA requirement. Yet, the Supreme Court held that he was not a highly compensated employee and was entitled to overtime pay. Why? Because form matters. To satisfy the salary test, an employee must be paid a predetermined amount each week regardless of how many days or hours the employee works during that week.

In light of the Helix Energy decision, employers who classify employees as highly compensated should carefully review the amount and form of compensation to avoid potentially costly FLSA claims.


If you have any questions about highly compensated employees or FLSA compliance, please don’t hesitate to contact the author Breanne Gilliam or another employment attorney at Miller Johnson.