High court deems ‘salary’ required to avoid overtime pay

In a case that may bring about a revamping of decades-old wage and hour law, the U.S. Supreme Court ruled that for an employee to be considered “exempt” from the Fair Labor Standards Act’s (FLSA) overtime requirements, they must be paid on a salary basis—regardless of the amount of money the employee earns.

Facts
The unusual facts of the case involved an employee who admittedly earned upwards of $200,000 a year and served in an executive capacity—normally reasons to exempt him from overtime—but who was paid a day rate of $963 rather than a salary, defined by Justice Elena Kagan as “a steady stream of pay, which the employer cannot much vary and the employee may thus rely on week after week.” The absence of that steady and reliable income was determinative for the Court, despite numerous alternative possibilities in the Department of Labor’s (DOL) often complicated regulations.

The argument focused on the relationship among various elements of the overtime rule, such as executive duties, amount of compensation, and whether “all or part” of the compensation is paid as a salary. In a 6-3 decision, the Court determined the original design and purpose of the FLSA was to assure that only those who met strict criteria could be exempt from receiving overtime pay. The Court held the bases for exemption must be read together and that an exempt employee must meet all applicable standards, including particularly being paid on a salary basis.

Dissent invites fundamental challenge