Big Win for Day Rate Employees: You Are Entitled to Overtime – Even if Highly Paid
In a big win for workers paid on a “day-rate” basis, a recent opinion out of the 5th Circuit, which covers Texas, Louisiana and Mississippi, makes it crystal clear that being paid a daily rate (even $1,000+/day and amounting to $200,000+/year) is not the same as being paid a salary. So, we now have the final answer to the question – Are day-rate workers entitled to overtime pay, even if they are highly compensated? The answer is that employees paid a daily rate cannot be classified as exempt from the overtime pay laws because they do not receive a guaranteed “salary” as required for the exemptions – meaning they are non-exempt and must be paid overtime. Workers who have been paid a day rate with no overtime may be entitled to recover up to double their back overtime pay for the past 2-3 years, and this can often amount to $10,000’s to $100,000’s in back wages.
Key Points for workers paid on a day-rate pay scheme:
- A day-rate, no matter how high, does not automatically meet the salary requirement necessary to avoid an employer’s obligation to pay overtime.
- Even if provided a guaranteed minimum per week ($684+), there must be a “reasonable relationship” between the guaranteed amount and the amount actually earned. Actual earnings should not be consistently greater than 150% of the guaranteed amount ($1,026+).
The Department of Labor, the Supreme Court, and the majority of lower courts nationwide have noted that “employees are not to be deprived of the benefits of the [overtime laws] simply because they are well paid.”
“A high income alone is never enough to exempt an employee from overtime.”
Yes – Day Rate Workers Earning $200,000+/year can be entitled to overtime pay.
The case was brought by an employee who had been working as a Tool Pusher (managing offshore oil rig workers for Helix Energy) for over two years. In that position, he managed other employees while on a “hitch”—that is, while working offshore on an oil rig. Each hitch lasted about a month. The company paid him a set amount for each day that he worked, and he worked more than forty hours a week. So, under the FLSA, he would ordinarily be entitled to overtime unless he was an exempt employee – which is what the company claimed, arguing that he was either an exempt executive or highly compensated employee.
Both of the exemptions asserted by the company require the employer to meet both a duties test and a salary test. The salary test has two components—first, the employer must pay the employee a minimum per-week rate, and second, the employer must pay the employee on a “salary basis.”
The employee claimed that he was not paid on a “salary basis” because his pay was calculated based on a daily, rather than weekly, rate. The company responded that his daily rate was greater than the weekly salary requirement under Labor Department regulations, so long as he worked at least a single day during any particular week, he would receive more than the weekly salary requirement, and was therefore paid on a “salary basis” under Labor Department regulations.
A “salaried” employee knows the amount of their compensation for each weekly pay period they work…before they work
The Labor Department regulations state:
An employee will be considered to be paid on a ‘salary basis’ within the meaning of this part if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.
The regulation requires that an employee receive for each pay period a “predetermined amount” calculated on a “weekly, or less frequent” pay period – i.e. the salary basis test requires that an employee know the amount of his compensation for each weekly (or less frequent) pay period during which he works, before he works.
The Tool Pusher in this case was paid biweekly but had to take the number of days he worked (past tense) and multiply by the daily rate to determine how much he earned. So, he only knew his pay after he worked through the pay period. He did not receive a “predetermined amount” “on a weekly, or less frequent basis”—rather, he received an amount contingent on the number of days he worked each week.
The court concluded that he was not paid on a “salary basis” and therefore the employer could not meet the requirement for any overtime pay exemption that requires an employee be paid a salary.
“Millions of Americans prefer more free time over more money. And that is so regardless of how much one is paid. The desire to rest, recreate, and spend time with loved ones is not confined to any particular income strata.”
What to Do If You Have Been Paid a Day-Rate but No Overtime Pay
If you have been working overtime and only received a set Daily Rate (or a day rate plus per diem and reimbursements) for each day you work, there is a good chance that you and your coworkers could be missing out on significant overtime wages. The first thing you should do is begin keeping your own accurate record of all time actually spent working. The next step should be to contact a lawyer who handles overtime pay and wage and hour cases to review your situation.
If you have questions or believe that you have been the victim of wage theft due to an illegal day-rate pay scheme, contact us for a free and confidential review of your situation.