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July 06, 2022
SCOTUS to Decide if Day-Rate Employee Making $200K Entitled to Overtime

by Philip R. Bruce

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Those familiar with the oil and gas industry know workers are often paid a day rate. For some, the pay can be lucrative. One such worker was Michael Hewitt, a tool pusher for Helix Energy Solutions Group. He was paid $963 each day he worked on a “hitch”—usually a period of two weeks on and two weeks off—and made more than $200,000 annually. Hewitt sued Helix, alleging he wasn’t paid a “salary” as defined by the Fair Labor Standards Act (FLSA) and was therefore entitled to overtime. The U.S. Supreme Court announced it will now determine if his day rate can be considered a salary.

What is a Salary?

As a reminder, employees are exempt from receiving overtime pay under the FLSA’s white-collar exemptions if they perform exempt duties and receive a salary. A “salary” is a guaranteed amount that doesn’t change based on the quality or quantity of work.

Currently, an employee must be paid a guaranteed salary of at least $684 a week. Further, the guaranteed salary must bear a “reasonable relationship” to the total amount of compensation the worker regularly receives.

Hewitt’s and Helix’s Arguments

Hewitt’s lawsuit is one of the many similar lawsuits, often filed as class or collective actions, that have kept federal courts busy for more than a decade. The tool pusher, as well as litigants in similar lawsuits, argued:

  • He wasn’t paid a salary because the amount he received each week wasn’t guaranteed. Rather, it depended on the number of days worked; and
  • Even if there was a guaranteed amount of at least $963 for working one day, it wasn’t reasonably related to the total of $6,741 he could make if he worked all seven days in a week.

Helix and similar defending parties argued Hewitt’s pay was guaranteed for at least the minimum amount required for a salary. In other words, if he worked one day, he was guaranteed to be paid $963, which is well above the minimum amount required.

Helix also argued Hewitt was considered highly compensated under the FLSA and that the Act’s highly compensated employee exemption doesn’t require a reasonable relationship between the guaranteed amount and total compensation.

5th Circuit Sides with Day-Rate Worker

A majority of the entire New Orleans-based U.S. 5th Circuit Court of Appeals, sitting en banc, issued a ruling in September 2021. They agreed with Hewitt, holding his day rate wasn’t a salary because his compensation fluctuated based on the number of days he worked.

The 5th Circuit also ruled there wasn’t a reasonable relationship between the total amount Hewitt regularly received and his day rate. Thus, the appellate court determined he was entitled to overtime, which would be a considerable amount based on the number of overtime hours he worked and his high level of pay.

The U.S. Supreme Court recently granted Helix’s petition for review and will determine whether (1) a sufficiently high day rate can be a salary under the FLSA and (2) the overtime regulations require there to be a reasonable relationship between the guaranteed amount and the total compensation. Hewitt v. Helix Energy Sols. Group, Inc., 15 F.4th 289 (5th Cir., 2021).

Takeaways for Employers

The Supreme Court will finally settle a dispute that has gone on for years. It will provide certainty to the oil and gas industry, which has paid day rates for decades, as well as other industries offering high day rates or other types of shift-work rates.

Hewitt’s case primarily involves the interpretation of federal regulations. Nevertheless, the court’s ruling will give all employers an insight into how courts should continually interpret the overtime regulations and how much deference they should give to the U.S. Department of Labor’s (DOL) positions.

Finally, Hewitt’s case is a good reminder to all employers and HR pros to be diligent about how they pay employees. FLSA compliance is incredibly technical and can be very fact-intensive. The dispute here isn’t that the tool pusher wasn’t paid enough. It was that he wasn’t paid in the right way.

Sometimes, employers assume paying an employee enough money means they’re complying with wage and hour laws. Too often, that only means they have more potential liability. To prevent that, you should regularly audit your pay practices to ensure compliance.

Philip R. Bruce is an attorney in the Oklahoma City office of McAfee & Taft. Phil counsels and represents employers exclusively in all aspects of labor and employment law, including matters involving wage and hour law, non-competition and non-solicitation agreements, employee handbook policies and procedures, hiring and onboarding procedures, USCIS Form 1-9 immigration compliance, discipline and termination, drug and alcohol testing, medical and disability leave, litigation avoidance, and compliance with a myriad of state and federal laws. He also defends employers in state and federal courts, before administrative agencies, and in arbitration against claims of workplace harassment, Title VII employment discrimination, FLSA violations, and wrongful discharge and retaliation. You can reach him at philip.bruce@mcafeetaft.com.

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