The United States Supreme Court is now poised to address a crucial issue relating to the extent to which offshore workers are covered by the Fair Labor Standards Act (FLSA) and related regulations. Earlier this month, the Supreme Court granted certiorari in Helix Energy Solutions Group, Inc. v. Hewitt, a Fifth Circuit case that deals with the highly compensated employee exemption under the FLSA.
Whether the Supreme Court affirms or overrules the Fifth Circuit will have a significant impact on how employers pay highly compensated offshore employees. The ruling may also have an impact on other ongoing litigation related to offshore employees, particularly the extent to which those employees who are “seamen” under the Jones Act may not be “seamen” under the FLSA and, therefore, entitled to overtime pay. The Fifth Circuit has also been wrestling with this issue in Adams v. All Coast.
Salary or Day Rate?
The FLSA establishes exemptions for “bona fide executive, administrative, [and] professional” employees from overtime pay. To qualify for an exemption, the employee must be paid on a “salary basis” and satisfy certain duties tests. Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis, and the predetermined amount cannot be reduced because of variations in the quality or quantity of the employee's work.
How Much for Hewitt?
Hewitt was employed by Helix Energy offshore as a toolpusher and was earning well over $200,000 per year. Hewitt claimed that Helix did not properly pay him on a “salary basis” because it calculated his pay based on a daily rate, rather than a weekly rate, and therefore he is entitled to overtime compensation and liquidated damages. Helix claimed Hewitt was a highly compensated executive employee and, therefore, he was exempt from overtime. Moreover, Helix noted that Hewitt’s daily rate was greater than the weekly salary requirement of $684 and, therefore, so long as Hewitt worked at least a single day during any particular week, he would receive more than the weekly salary requirement.
In reversing the trial court’s grant of summary judgment for Helix, the en banc Fifth Circuit Court of Appeals held that Helix Energy’s daily pay system and argument was contrary to the plain language of the statute that states “[A]n exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.”
To fall within the overtime exemption, the Court set the following test: “First, the employee must meet certain criteria concerning the performance of executive, administrative, and professional duties. Second, the employee must meet certain minimum income thresholds. Finally, the employee must be paid on a ‘salary basis.’ And although the duties criteria and income thresholds vary from exemption to exemption, the regulations apply the same salary-basis requirement to all four exemptions.”
The parties agreed Hewitt meets both the duties requirements and income thresholds for purposes of being exempt from overtime. The decision turned, however, on whether Hewitt’s day rate could be regarded as a “salary” under the FLSA, under which a daily-rate worker can still be exempt from overtime—but only “if” the employment arrangement also includes a guaranteed weekly amount of pay regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.
The Fifth Circuit claimed that its ruling was consistent with those from the Sixth and Eighth Circuits, as well as the Department of Labor. The dissenting Fifth Circuit judges disagreed, with one judge stressing that it was important to “emphasize how common sense and a reasonable reading of the law combine to demand a result opposite the one reached originally by the panel majority and today by the en banc majority.” According to J. Wiener, “Ever since 1944, when the FLSA… exempted highly compensated, executive employees from overtime, neither the Supreme Court nor any federal Court of Appeals has ever held that a supervisor like Hewitt—who, as stated above, made more than twice the regulatory cap of entitlement to overtime by working for Helix no more than half the days in a year—was anything but not entitled to overtime.”
What Will the Supreme Court Do?
Predicting how the Supreme Court will rule in Hewitt is impossible. The case does not present an issue that lends itself to a natural “conservative” v. “liberal” divide. On the one hand, one would expect the more liberal wing of the Supreme Court to take a protective view of expansive labor rights. Would such a willingness extend to ensuring that an employee who was already paid a significant amount also receives overtime? On the other hand, the Fifth Circuit ruling was authored by Judge Ho (an appointee of President Trump) but based on a strict and close textual reading of the relevant statute and regulations, an approach that has traditionally found favor with more conservative justices. Or would such approach be found to fail the “common sense” approach urged by the dissenting judges in the Fifth Circuit? Briefing is now underway. Argument and a ruling are expected later this year.