An offshore oil rig employee who earned upwards of $200,000 per year and worked well over 40 hours per week is entitled to receive overtime pay for extra hours worked even though the company classified him as an overtime-exempt executive, the Supreme Court ruled on Feb. 22.
The 6-3 ruling is important because it is expected to have an impact on the energy industry, which tends to rely on daily pay rates instead of salaries to compensate employees, including those who hold high-paying jobs in energy exploration.
The employer, Helix Energy Solutions Group, said the employee, Michael Hewitt, didn’t qualify for overtime pay under the Fair Labor Standards Act (FLSA), even though he routinely put in 84 hours per week on rigs. The company categorized him as an executive, which would preclude the possibility of overtime pay.
Hewitt, whose job is described as “tool pusher,” said the company did not offer him minimum weekly guaranteed pay, so the earnings he generated on a daily basis cannot be considered salary.
According to the act, executives have to be paid on a salary basis, which means their predetermined pay has to be “calculated on a weekly, or less frequent basis” and not related to the number of hours worked each week.
Regulations stipulate that employees paid on an hourly, daily, or shift basis can be deemed salaried and therefore overtime-exempt if the employer guarantees “at least the minimum weekly-required amount” regardless of the number of hours, days, or shifts worked.
The company said Hewitt had to be treated as an executive because he took in more than the minimum weekly pay and his compensation never fluctuated, according to a Bloomberg Law summary of the case.
After Helix fired him, Hewitt sued the company for hundreds of thousands of dollars in retroactive overtime pay. A U.S. district court sided with the company, finding Hewitt was a salaried employee ineligible for overtime pay, but the U.S. Court of Appeals for the 5th Circuit went the other way, overturning the ruling.
The Fair Labor Standards Act of 1938 (FLSA) provides that employees covered by it receive overtime pay when they work more than 40 hours a week. But the law states that an employee is not deemed covered and therefore not entitled to overtime pay if he works “in a bona fide executive, administrative, or professional capacity” as defined in regulations.
The regulations state that an employee falling under the “bona fide executive” heading is to be paid on a “salary basis.” Additional regulations elaborate on the salary-basis requirement, as it is applied to both lower-income and higher-income employees.
Although the company deemed Hewitt a “bona fide executive,” the relevant consideration is “whether a high-earning employee is compensated on a ‘salary basis’ when his paycheck is based solely on a daily rate—so that he receives a certain amount if he works one day in a week, twice as much for two days, three times as much for three, and so on,” Kagan wrote for the court.
“We hold that such an employee is not paid on a salary basis, and thus is entitled to overtime pay,” she wrote, ruling in favor of the employee in Helix Energy Solutions Group Inc. v. Hewitt, court file 21-984.
What is unusual about the 6-3 ruling is that it does not represent the usual philosophical groupings—six conservatives and three liberals—normally associated with the court. The 6-3 split here represents an unusual cleavage of the court’s ideological blocs, pitting half the court’s conservatives, who sided with the majority, against the other half, who dissented.
Kagan’s opinion was joined by three conservative members of the court—Chief Justice John Roberts and Justices Clarence Thomas and Amy Coney Barrett. The two other liberal justices, Sonia Sotomayor and Ketanji Brown Jackson, also joined the majority. Conservative Justices Neil Gorsuch and Brett Kavanaugh each filed a separate dissenting opinion. Justice Samuel Alito joined the Kavanaugh dissent.
Kavanaugh wrote in his dissenting opinion that he would hold that Hewitt was a “bona fide executive” at Helix “and therefore not entitled to overtime pay.”
Kavanaugh also questioned whether the regulations issued under the FLSA, which “look not only at an employee’s duties but also at how much an employee is paid and how an employee is paid” will survive “if and when the regulations are challenged as inconsistent with the Act.”
“It is especially dubious for the regulations to focus on how an employee is paid (for example, by salary, wage, commission, or bonus) to determine whether the employee is a bona fide executive. An executive employee’s duties (and perhaps his total compensation) may be relevant to assessing whether the employee is a bona fide executive,” the justice wrote.
“But 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,” he added.
Justice Neil Gorsuch said in his opinion that he would throw out the case as “improvidently granted,” a legal expression courts use when they change their minds after agreeing to hear a case and later decide they don’t want it to go forward.
The Supreme Court let the company’s appeal of the lower court decision proceed in the expectation it would deal with the “regulations certain well-paid employees must satisfy to fit within the overtime-pay exemption.”
“Unfortunately, this case does not tee up that issue in the way we hoped,” he wrote. “With the benefit of briefing and argument, it has become clear that the ‘critical question here’ is not how” two parts of the FLSA interact, he wrote.
The Epoch Times reached out to counsel of record for both sides but had not received a reply from either as of press time.
