SCOTUS Sides With Daily-Rate Employee

Employment Law

Siding with an employee, the U.S. Supreme Court held that a daily-rate employee was entitled to overtime under the Fair Labor Standards Act (FLSA) despite the fact he earned over $200,000 annually.

Michael Hewitt typically worked 84 hours per week on an offshore oil rig for Helix Energy Solutions Group from 2014 to 2017. He was paid a daily rate times the number of days he worked, and earned north of $200,000 each year.

Hewitt filed suit under the FLSA, asserting that he was entitled to overtime pay.

The employer objected, arguing that Hewitt was exempt from the FLSA because he qualified as “a bona fide executive” under 29 U.S.C. § 213(a)(1).

Pursuant to the applicable regulations, an employee is considered a bona fide executive excluded from the FLSA’s protections if the employee meets three tests: (1) the “salary basis” test, which requires that an employee received a predetermined and fixed salary that does not vary with the amount of time worked; (2) the “salary level” test, which requires that preset salary to exceed a specified amount; and (3) the “job duties” test.

The issue turned solely on whether Hewitt was paid on a salary basis. The district court adopted Helix’s view that Hewitt was compensated on a salary basis, and the Fifth U.S. Circuit Court of Appeals reversed, ruling that Hewitt wasn’t paid on a salary basis and therefore the exemption didn’t apply.

In an opinion authored by Justice Elena Kagan, the Court affirmed, concluding that Hewitt was not an executive exempt from the FLSA’s overtime pay guarantee because daily-rate workers, regardless of income level, qualify as paid on a salary basis only if the conditions in the regulations are met.

Justice Kagan—joined by Chief Justice John G. Roberts, Jr., and Justices Clarence Thomas, Sonia Sotomayor, Amy Coney Barrett and Ketanji Brown Jackson—explained that §602(a) of the regulation applies solely to employees paid by the week (or longer) and is not met when an employer pays an employee by the day, as Helix paid Hewitt.

“Daily-rate workers, of whatever income level, are paid on a salary basis only through the test set out in §604(b) (which, again, Helix’s payment scheme did not satisfy),” the justices wrote. “Those conclusions follow from both the text and the structure of the regulations. And Helix’s various policy claims cannot justify departing from what the rules say.”

The Court focused on §602(a), the text of which excludes daily-rate workers, as the regulations state the coverage under this provision calls for the payment of a “predetermined amount,” which is “without regard to the number of days or hours worked.”

Giving language its ordinary meaning, nothing in that description fits a daily-rate worker like Hewitt, Justice Kagan wrote, who by definition was paid for each day he worked and no others.

The broader regulatory structure confirmed this reading of §602(a), the Court said, and Helix’s policy arguments could not change the outcome.

“[A]s this Court has explained, ‘even the most formidable policy arguments cannot overcome a clear’ textual directive,” the justices said, adding that workers are not “deprived of the benefits of the Act simply because they are well paid.”

Nor did Helix’s operational and cost-based objections move the needle.

“A daily-rate employee like Hewitt is not paid on a salary basis under §602(a) of the Secretary’s regulations,” the Court held. “He may qualify as paid on salary only under §604(b). Because Hewitt’s compensation did not meet §604(b)’s conditions, it could not count as a salary. So Hewitt was not exempt from the FLSA; instead, he was eligible under that statute for overtime pay.”

Justice Neil M. Gorsuch filed a dissenting opinion, as did Justice Brett M. Kavanaugh, who was joined by Justice Samuel A. Alito, Jr.

To read the opinion in Helix Energy Solutions Group, Inc. v. Hewitt, click here.

Why it matters: The 6-3 decision established that daily-rate workers—regardless of income level—qualify as paid on a salary basis only if the conditions in the regulations are met. As Hewitt did not meet the requirements, he was entitled to the overtime protections of the FLSA.



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