Private employers who consider certain top, highly compensated executives not to be entitled to receive overtime pay may need to change their pay practices under a new Supreme Court decision.
In the case of Helix Energy Solutions Group, Inc. v. Hewitt, decided by a 6-3 vote on February 22, the high court ruled that only highly compensated executives who are paid a fixed salary may be considered exempt from overtime pay under the federal Fair Labor Standards Act (FLSA).
In an opinion heavily laden with a discussion of the arcane and highly technical minutiae of federal overtime statutes and Labor Department regulations, Justice Elena Kagan wrote: “The question here 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. We hold that such an employee is not paid on a salary basis, and thus is enti-tled to overtime pay.”
A ”salary” under the FLSA is a predetermined and fixed salary whose amount does not vary with the precise amount of time that the employee works, according to the court’s opinion.
Employees are not “deprived of the benefits of [overtime compensation] simply because they are well paid,” Justice Kagan wrote.
The FLSA, which sets the federal minimum wage of $7.25 an hour, also establishes a basic standard 40-hour workweek by requiring employers to pay “time and a half” for any additional time worked, although the law specifies that certain types of employees are exempt from the overtime pay requirements. These are, among others, highly paid employees, executives, administrative and professional employees, computer professionals, and outside sales employees who are paid on a salary, rather than hourly, basis.
The case involved Michael J. Hewitt, a resident of Tennessee who between 2014 and 2017 worked for Helix Energy Solutions Group of Houston as a “tool-pusher” or supervisor on a Louisiana offshore oil rig.
Reporting to the rig captain, Hewitt oversaw various aspects of the rig’s operations and supervised 12 to 14 workers. He typically, but not invariably, worked 12 hours a day, seven days a week—so 84 hours a week—during a 28-day “hitch.” He then had 28 days off before reporting back to the offshore vessel.
Helix paid Hewitt on a daily-rate basis, with no overtime compensation, considering him to be exempt under the FLSA. The daily rate ranged, over the course of his employment, from $963 to $1,341 per day. His paycheck, issued every two weeks, amounted to his daily rate times the number of days he had worked in the pay period. So if Hewitt had worked only one day, his paycheck would total (at the range’s low end) $963; but if he had worked all 14 days, his paycheck would come to $13,482. Under that com¬pensation scheme, Helix paid Hewitt over $200,000 annu¬ally.
After being fired, Hewitt filed a class action lawsuit in 2017 to claim that he and others were owed hundreds of thousands of dollars in unpaid overtime compensation. The federal district court in Houston agreed with the employer that Hewitt was exempt as a salaried highly compensated executive. U.S. District Judge Kenneth M. Hoyt dismissed the lawsuit at the summary judgment stage without a trial.
However, on Hewitt’s appeal the Court of Appeals for the Fifth Circuit, in New Orleans, reversed that judgment, deciding that Hewitt was paid on a daily rate and not on a salary basis and therefore could claim the FLSA’s protections. Upon further appeal by Helix, the Supreme Court agreed with the Fifth Circuit and ruled in Hewitt’s favor.
Three dissenting justices – Neil Gorsuch, Brett Kavanaugh, and Samuel Alito – argued in the minority that Hewitt was a bona fide exempt executive for Helix not entitled to overtime pay or, alternatively, that the appeal should be dismissed because Helix had misrepresented to the court the correct subject matter to be decided.
The full text of the court’s decision is available free online at https://www.supremecourt.gov/opinions/slipopinion/22.