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Oil rig supervisor earning six figures prevails at high court on overtime claims

Executive positions are normally exempt from overtime rules, but the majority clarified Wednesday that this is true only if they earn a fixed salary.

WASHINGTON (CN) — A pair of Supreme Court justices balked Wednesday after their colleagues in the majority found that an oil rig supervisor was eligible for overtime pay even though his daily rate already earned him up to a quarter-million dollars a year. 

Joined in a dissent by Justice Samuel Alito, Justice Brett Kavanaugh called it puzzling for the majority to focus on the need for a certain weekly salary that amounted to half as much as what the worker in the case, Michael Hewitt, was paid by the day. 

“The Court’s contrary conclusion boils down to the head-scratching assertion that Hewitt was somehow not guaranteed to receive at least $455 for any week that he worked even though (as all agree) he was in fact guaranteed to receive $963 for any day that he worked,” the Trump appointee wrote (parentheses in original). 

Kavanaugh claims the court’s conclusions do not hold up to the text of the regulations and facts of the case. 

“Because Hewitt performed executive duties, earned at least $100,000 per year, and received a guaranteed weekly salary of at least $455 for any week that he worked, I would hold that Hewitt was not legally entitled to overtime pay under the regulations,” Kavanaugh wrote. 

Justice Elena Kagan wrote for the majority that Hewitt's earnings do not qualify as a salary under federal regulations because he was paid by the day. When he was hired in 2014 to work a job called toolpusher, the offshore oil and gas operator Helix Energy Solutions was paying him $963 a day.

With a schedule that consisted of working 12-hour days for 28 days in a row, Hewitt was paid over $200,000 annually. In 2017, however, Helix fired Hewitt for performance issues, and he sued for overtime.

“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,” Kagan wrote for the majority Wednesday. “We hold that such an employee is not paid on a salary basis, and thus is entitled to overtime pay.” 

Ed Sullivan, an attorney for Hewitt with the firm Oberti Sullivan in Houston, applauded the majority decision Wednesday.

"My client and team are appreciative that the Supreme Court applied the plain text of the law to his case and vindicated the FLSA’s salary basis test, which is the hallmark of exempt status," Sullivan said in an email.

Kagan noted that what Helix was paying, while amounting to a high income, does not qualify as a salary under federal regulations.

“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 Obama appointee 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.” 

Helix argued that Hewitt was exempt from overtime pay because his position as a toolpusher was a senior one. Working mostly in a mostly capacity, Hewitt supervised between 12 and 14 workers and had oversight role in operations on the rig.

Kavanaugh agreed, writing in the dissent that such massive earnings, on top of the supervisory duties of Hewitt's role, made "Hewitt was a 'bona fide executive' ... and therefore not entitled to overtime pay."

Enacted in 1938 to protect workers and ensure they were paid fair wages, the Fair Labor Standards Act includes provisions for child labor, minimum wage and overtime compensation. The law was written with blue-collar workers in mind, however, and its so-called EPA exemptions for overtime requirements exclude executive, administrative or professional workers. Employees are considered to fall into these exemptions if they meet a duties test based on their management responsibilities and hiring capabilities. The exemptions also take into account employees' compensation. 

Nearly 20 years ago, however, the Labor Department streamlined those tests. Now the exemptions cover highly compensated employees who earn at least $100,000 annually and at least $455 per week on a salary basis, while performing the duties of executive administrative or professional employees. 

Hewitt initially prevailed on his overtime suit in federal court, but the Fifth Circuit reversed, ruling that Hewitt was not paid on a salary basis so therefore he did not qualify for exemptions under either test. An en banc ruling from the Fifth Circuit still found Hewitt non-exempt but this time because Helix did not satisfy the statute’s reasonable-relationship requirement. Helix then appealed to the Supreme Court. 

“The FLSA was enacted to protect low-wage, blue-collar workers from workplace exploitation, not to give massive windfalls to white-collar supervisors already making six figures,” Paul Clement, an attorney with Clement & Murphy representing Helix Energy Solutions, wrote in a brief for the company.

Hewitt focused meanwhile on the FLSA's requirement that overtime-exempt employees be paid weekly or a less-frequent basis, earning a predetermined amount that is not subject to change based on work performance. 

Hewitt argues that the court’s ruling on this case could have domino effects across the nation. 

“Adoption of Helix’s position would undermine settled employment practices throughout all industries,” Samuel Kaplan with Boies Schiller wrote in the brief for Hewitt. “As discussed in the preamble to the 2004 regulations, without a reasonable-relationship test, employers could reduce the weekly guarantee to the minimum, not pay overtime, and subject most of the employee’s workweek to the deductions that are prohibited for salaried compensation.” 

Justice Neil Gorsuch dissented from the majority opinion separately on Wednesday, saying the court shouldn't have ruled on the case at all because it did not properly tee up the issue. 

“After successfully petitioning the Court to decide how §541.601 relates to §541.604, Helix Energy assured us that ‘the flaw in the decision below has nothing to do with the salary-basis test’ in §541.602,” the Trump appointee wrote. “I might excuse that disclaimer as a mere rhetorical flourish if Helix Energy’s briefing nonetheless ‘made clear’ the ‘importance’ of §541.602 to this case. But it did not.” 

Categories:Appeals, Business, Employment

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