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Workers paid daily rate entitled to overtime pay, high court rules

The U.S. Supreme Court has ruled that a highly compensated offshore oil rig worker was entitled to overtime pay. In Helix Energy Solutions Group, Inc. v. Hewitt, the court determined Feb. 22 that employees paid a daily rate are not compensated on a salary basis.

Michael Hewitt was a supervisor on oil rigs for Helix Energy, managing 12 to 14 other workers. In that position, he regularly worked 84 hours per week on the rigs, working 12 hours per day, seven days a week, over a 28-day period. Hewitt was paid a day rate that ranged from $963 to $1,341. He earned more than $200,000 annually.

The dispute between Hewitt and employer Helix arose when Helix asserted that Hewitt was not entitled to overtime wages under the Fair Labor Standards Act. The FLSA requires overtime pay of 1.5 times the regular rate for every hour worked beyond 40 in a workweek. Since Hewitt was working 44 hours in overtime, he would be making nearly $12,000 per week in overtime. But Helix pointed to a FLSA EAP (executive, administrative, and professional), HCE (highly compensated employee) overtime exemption for those who perform managerial duties, earn $100,000 or more per year, and receive a weekly salary of $455 or higher on a salary basis.

“The mandate that employees working more than 40 hours per week must be paid time and a half forces employers to pause before requiring employees to work long hours that can be both mentally and physically debilitating,” David Larson, professor at Mitchell Hamline School of Law, said. “That mandate also encourages employers to hire additional employees rather than requiring overtime, thus increasing the overall employment rate.”

Finding in favor of Hewitt, the court ruled 6-3, with Samuel Alito, Neil Gorsuch, and Brett Kavanaugh dissenting. It upheld the ruling issued by the 5th U.S. Circuit Court of Appeals issued in September 2021. The court established that exempt bona fide executives must satisfy the “salary basis” test. It determined that Helix did not establish a flat, predetermined amount that Hewitt would be paid. In other words, there was no steady stream of pay Hewitt could count on receiving each week. Hewitt was not paid on a salary basis, so he was not subject to the EAP, HCE FLSA exemption.

Larson said the Supreme Court looked at the plain, ordinary meaning of the language of the FLSA and did not veer from it.

“When Helix urged the court to consider formidable policy consequences, such as significant retroactive liability, the court was dismissive,” Larson said. “The court emphasized that ordinary language must be given its ordinary meaning, referring several times to Webster’s New International Dictionary.”

Employment law experts advise employers to pay attention to this decision.

“It is not surprising that an employer would assume that an employee earning $200,000 per year, as the plaintiff did in Helix Energy Solutions Group, Inc. et al. v. Hewitt, is not entitled to overtime pay,” Larson acknowledged. “Employers may now need to be more careful concerning how employees are compensated.”

Dan Prokott, a partner at Faegre Drinker, advised, “Employers who have been paying employees on a daily rate basis, including ‘highly compensated employees’ earning at least $107,432 annually, without paying overtime for hours worked in excess of 40 hours in a workweek, should review their pay practices.”

Charlotte Garden, professor at Minnesota Law, said, “The decision gives employers an incentive to shift their workers from a day rate to a weekly rate — though that won’t be practical for every profession.”

This case involved an individual who had the job title of “tool pusher” in the oil industry — but the decision may have effects beyond that industry.

“The employee in this case was an oil rig worker, but nurses’ unions filed amicus briefs in the case because their members would also be affected,” Garden noted. “Any EAP employee — highly compensated or not — must also be paid on a salary basis to be exempt from overtime, so this decision could have effects beyond HCEs — though it’s more likely to arise in the HCE context because other workers are less likely to meet the duties test.”

Prokott said, “Importantly, the Fair Labor Standards Act permits an employer to pay an exempt employee — one who otherwise satisfies the salary-basis test and an applicable duties test to qualify as an exempt employee — additional compensation beyond the employee’s regular salary, including for extra hours or days worked in a workweek, without losing the exemption or violating the salary basis requirement.

“Therefore, it’s possible one effect of the Supreme Court’s decision could be that certain employers who have been paying workers based on a daily rate without overtime pay could pivot to paying a guaranteed minimum salary of at least $684/week (perhaps significantly higher than this amount in some industries) plus additional compensation based on the number of days worked by the employee during the workweek or other criteria.”

Garden does not believe that this decision was the final word on the issue.

“We should expect continued litigation over this issue,” Garden suggested. “At oral argument and in the Kavanaugh/Alito dissent, the justices questioned whether the salary basis requirement, which appears in the regulatory language but not in the statute itself, was consistent with the statutory language.”

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