Skip to main content Skip to footer

Supreme Court Decision Highlights the Importance of the FLSA Salary Basis Test

Supreme Court Decision Highlights the Importance of the FLSA Salary Basis Test

The Supreme Court has ruled that an employee who worked on an offshore oil rig and earned more than $200,000 annually was not an executive employee exempt from the overtime provisions of the Fair Labor Standards Act (FLSA). The employee was paid on a daily rate basis with no overtime compensation. The Court determined that he was not paid on a salary basis as defined under the FLSA’s exemption standards and thus was entitled to overtime pay.

The main question before the Court was whether a high-earning employee was compensated on a salary basis when his paycheck was based solely on a daily rate.

The exemption standard is generally comprised of three distinct parts. The first is the salary basis test. The second element is the salary level test. And the third is the job duties test, which focuses on the nature of the employee’s job responsibilities. In this instance, whether the employee was an executive exempt from the FLSA’s over¬time pay guarantee turned solely on whether he was paid on a salary basis. While much of the focus on an FLSA exemption analysis focuses on the job duties of the employee and the amount of pay he or she receives, this decision is a reminder that the way the employee is paid (the salary basis test) should also be considered.



Adams Keegan

In Category: 

We use cookies to improve user experience and analyze website traffic. By clicking “Accept“, you agree to our website's cookie use as described in our Privacy Policy.