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Discussion of the February 2023 Supreme Court decision in Helix Energy Solutions Group, Inc. v. Hewitt, No. 21-984, 2023 U.S. LEXIS 944 (Feb. 22, 2023).

Michael Hewitt was a tool pusher employed by an energy producer, Helix Energy Solutions Group. As anyone raised in Texas knows, a tool pusher is a supervisor on a drilling rig. Hewitt supervised 12 – 14 employees, had management as his primary duty, and was classified as an exempt executive by Helix.

The Fair Labor Standards Act of 1938, 29 USC 201 et. seq., (FLSA) is the federal wage and hour law. It is a general requirement of the FLSA that employees be paid overtime when they work more than 40 hours in a given workweek. There are a number of exemptions from the overtime requirement in the FLSA, however, and the most important is the exemption for bona-fide executive, administrative, and professional employees, and outside salespersons. As a supervisor, Hewitt was eligible for the executive classification.

In order to be exempt as an executive, however, Hewitt had to meet both a duties test and a salary test. Both Helix and Hewitt stipulated that Hewitt met the duties test. He was not paid a salary, however. Rather, he was paid a daily rate. At the time this case arose, the minimum salary for exemption was $455.00 per week. Hewitt was paid from $963.00 to $1,341.00 per day.

After he was terminated, Hewitt sued Helix for back overtime pay. His case was simple—”I regulations require payment on a salary basis in order to be exempt, and I was paid a daily rate.” Helix’s position was equally simple—”If he worked even one day in a workweek, he earned more than twice the required minimum salary.”

Hewitt lost in the district court, but won at the Fifth Circuit Court of Appeals. The matter was appealed to the Supreme Court, which issued its decision on February 22, 2023. The case turned on the exact language of the regulations. The applicable regulation, 29 CFR 541.602, says:

“An employee will be considered to be paid on a “salary basis” within the meaning of this part if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.”

29 CFR 541.602(a)

It goes on to say: “…an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked. Exempt employees need not be paid for any workweek in which they perform no work.”

29 CFR 541.602(a)(1) (emphasis added).

Helix said, “Because Hewitt’s paycheck came every two weeks, and because that check always contained pay exceeding $455.00 (the salary level) for any week he had worked at all, Helix concludes that Hewitt was paid, under §602(a), on a salary basis.” 598 U.S. ____ (2023)  On the other hand, the majority opinion by Justice Kagan states:

“Suppose (to approximate the compensation scheme here) such a worker is paid $1,000.00 each day, and usually works seven days a week, for a total of $7,000.00. Now suppose he is ill and works just one day in a week, for a total of $1,000.00. Is that lesser amount (as Helix argues) a predetermined, ’full salary for [the] week’—or is it just one day’s pay out of the usual seven? Has the amount been paid ’without regard to the number of days’ he worked—or precisely with regard to that number? If ordinary language bears ordinary meaning, the answer to those questions is: the latter. A daily-rate worker’s weekly pay is always a function of how many days he has labored. It can be calculated only by counting those days once the week is over—not, as §602(a) requires-, by ignoring that number and paying a predetermined amount.

598 U.S. ____ (2023)

The takeaway here is that a daily rate, no matter how great, isn’t a salary, and employees paid on a daily rate cannot be exempt even if their duties would otherwise qualify them as exempt. This issue has been litigated many times in recent years in the oil patch. Oil drillers and service companies want to pay their employees on a daily rate basis. Helix Energy might just put an end to this litigation.

The three liberal Justices—Kagan, Sotomayor, and Jackson—were joined by three conservatives; Roberts, Barrett, and Thomas. Respect for the exact text of the regulation carried the day. Justice Gorsuch filed a dissenting opinion in which he suggested that one of the issues that should have been raised was whether the U.S. Dept. of Labor’s (DOL) regulations requiring a salary basis of payment was valid in the first place. The salary test has been in the regulations since 1940. The regulations have been amended many times since then, and the statute itself has been amended frequently. The courts have decided countless FLSA cases, and even the Supreme Court itself has decided a number of FLSA cases including cases that directly address the salary basis, See, e.g., Auer v. Robbins, 519 U.S. 452 (1997). It would seem a little late in the game to decide that the DOL’s regulations, authorized by the text of the statute itself, erroneously include a salary test. The majority, however, chose not to rule on this issue, as it had not been raised in the courts below.



Avatar of Brian Farrington
Brian T. Farrington is a Shareholder and Section Head of the Cowles and Thompson Employment Law section. His practice consists of transactional work and litigation advising and representing management concerning employment law, and particularly in the areas of Fair Labor Standards Act and Equal Employment Opportunity laws. He consults with employers to assist them in compliance and to represent them in investigations by the U.S. Department of Labor, Wage and Hour Division. Brian also advises clients on compliance with state wage and hour laws and represents them in investigations by state Departments of Labor. He also advises on matters related to Texas Workforce Commission unemployment eligibility, government contracts labor standards (Davis Bacon Act, Service Contract Act), OSHA 11(c), and state wage payment laws. Brian has represented clients in litigation under the FLSA, Title VII, the ADEA, and the ADA. Prior to becoming an attorney, Brian spent 12 years working with the US Department of Labor Wage & Hour Division. He has served as an Expert Witness in FLSA employment matters, and is a trained employment-related mediator.