Client Alert: Supreme Court Addresses Executive Compensation For Supervisors Paid a Daily Rate
Date: February 24, 2023
As background, highly compensated employees, those identified as “Executive” or “Administrative” under the Federal Fair Labor Standards Act (“FLSA”), can be overtime exempt if performing certain high level functions, and if paid on a “salaried basis.” At issue, the U.S. Supreme Court addressed whether an individual, otherwise entitled to exempt status, loses that status if paid on a daily pay basis – that is whether daily paid individuals are receiving a “salary.”
The Court’s holding confirms the Supreme Court’s adherence to a long-standing FLSA provision and deference to the Department of Labor’s regulations. In a co-authored amicus brief with the U.S. Department of Justice in October, the Department of Labor said that "given the regulations' text and long history, it should have been no surprise that daily-rate pay does not qualify as payment on a 'salary basis.'"
The Supreme Court ruling shows the importance of properly applying the FLSA’s exemption criteria. Many of the FLSA’s exemption tests require an in-depth review of job duties and pay structure, and are rife with technical requirements and potential pitfalls. Misclassifying employees as exempt can be costly in the long run, and the need to comply with the particular requirements for exemptions contained in the FLSA extends to even the most highly-paid employees.
The Labor and Employment practice group at Whiteford, Taylor & Preston regularly advises and counsels clients on FLSA issues, including classification of employees.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.