The Supreme Court released an interesting labor law opinion, Helix Energy Solutions Group, Inc. v. Hewitt. The Fair Labor Standards Act of 1938 (FLSA) requires “covered employees” to receive overtime pay for work over 40 hours a week. Employees who work “in a bona fide executive, administrative, or professional capacity” are not covered. Unfortunately, those words do not shed much light on the status of the employee, and so their status is determined through regulations requiring the putatively uncovered employee to meet three tests: The Salary Basis Test, the Salary Level Test, and the Duties Test. The Duties Test is different for individuals with income of less than $100,000. The others, “highly compensated employees,” need only meet one of the three listed responsibilities rather than all three.
One illustrative example of how these tests are applied is the case of Michael Hewitt. Mr. Michael Hewitt worked for Helix Energy Solutions Group from 2014 to 2017 as a “tool-pusher.” In this capacity, he supervised a dozen or more workers. He worked in intense 28-day shifts—for one 28-day period known as a “hitch,” he would work an average of 84 hours a week but then have leave for the following 28-day period. He was paid biweekly throughout this time at a daily rate for each day he actually worked. Ultimately, “Helix paid Hewitt over $200,000 annually” without overtime.
The district court initially ruled in favor of the employer, but that decision was reversed by the 5th Circuit sitting en banc. The sole issue that was ultimately determinative was whether Mr. Hewitt was paid on a “salary basis.” Salary-basis may be met through either 29 C.F.R. § 541.602(a) (§ 602(a)) or 29 C.F.R. § 541.604(b) (§ 604(b)). Section 602(a) requiring “that the employee will get at least part of his compensation through a preset weekly (or less frequent) salary, not subject to reduction because of exactly how many days he worked.” Section 602(b) offers an option for employees who are compensated on “an hourly, a daily or a shift basis” instead of a weekly (or less frequent) one. This requires the employer to guarantee a certain amount “roughly equivalent to the employee’s usual earnings at the assigned hourly, daily or shift rate for the employee’s normal scheduled workweek” and that such an amount is at least $455 per week (the opinion varies between “at least” $455 and “more than” $455) “regardless of the number of hours, days or shifts worked.” The employer conceded that § 602(b) was not met (there was not a guarantee of at least $455 per week) but argued that § 602(a) was satisfied. The Court disagreed and stated that § 602(a) applied only to employees paid by the week or longer and found that Mr. Hewitt was paid by the day.
The Supreme Court decision was made 6 to 3, with Chief Justice Roberts, Justice Thomas, and Justice Barrett joining the 3 Democratic appointees for an opinion delivered by Justice Kagan. Justice Gorsuch dissented, arguing that the case should be dismissed as improvidently granted as beyond the question for which the Court granted certiorari. Justice Kavanaugh, joined by Justice Alito, dissented on more substantive grounds. He argued that the $963 daily rate sufficed as fulfilling the weekly (or less frequent) as working for one day would effectively grant Mr. Hewitt $963 for the week, which is more than the $455 per week requirement. Justice Kagan described this argument as “a non-sequitur to end all non-sequiturs.” Helix forfeited its argument that the regulations were contrary to the statute by failing to raise it in the lower courts. Nevertheless, Justice Kavanaugh found the argument persuasive because, in his words, “I am hard-pressed to understand why it would matter for assessing executive status whether an employee is paid by salary, wage, commission, bonus, or some combination thereof.”
Helix serves as a reminder of the importance of being aware of the regulations and planning consciously to operate within them. As the majority opinion observed, had Helix “convert[ed] Hewitt’s compensation to a straight weekly salary for time he spends on the rig,” it would not have needed to pay overtime.
If you have questions or concerns about how these news reports may affect you or your business, please contact The Burton Law Firm at: 916-822-8700 or email info@lawburton.com for a consultation.
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California has required employers to “indemnify” employees for “necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer” in substantially the same terms since 1937 under Labor Code § 2802.
