Whether a day rate constitutes a salary under the FLSA is an issue that has generated substantial debate in the past few years, nowhere more so than in the U.S. Court of Appeals for the Fifth Circuit.  The 5th Circuit recently issued its highly-anticipated opinion in Hewitt v. Helix, finding that a day rate is not a salary. This issue is important, as many oilfield workers are paid day rates.  If a day rate is a salary under the FLSA, such workers would typically be exempt under the highly compensated employee, executive, professional and/or administrative exemptions.  If a day rate is not a salary, such workers are generally entitled to overtime pay. A number of states, energy companies and industry groups filed amici briefs, arguing on the side of exempt status.  Among those filing amicus briefs were:

• Independent Petroleum Association of America;
• States of Mississippi, Louisiana, Alabama, Montana and Utah;
• Offshore Operators Committeee; and
• Texas Oil & Gas Association. 

The Fifth Circuit originally found that a worker paid a day rate was paid on a salary basis, and thus exempt under the highly compensated exemption in Faludi v. U.S. Shell Solutions, LLC, 936 F.3d 215, 219-20) (5th Cir. 2019), though it later withdrew this decision and affirmed in favor of the defendant on a different ground.  The Fifth Circuit subsequently held that day rate workers did not meet the salary basis requirement in Hewitt v. Helix Energy Sols. Grp., Inc., 983 F.3d 789, 793-94 (5th Cir. 2020), though it subsequently vacated this opinion and granted an en banc hearing, which was held on May 25, 2021. On September 9, 2021, the 5th Circuit issued its en banc opinion in Hewitt v. Helix (“Helix II”), finding in a divided opinion (12–6), that payment on a day-rate basis “‘does not constitute payment on a salary basis’” for the purpose of the highly compensated employee exemption. In addition, the court concluded that, because the employee was paid on a day-rate basis, the employer could not take advantage of the salary-basis test under 29 C.F.R. § 541.604(b) because the guaranteed salary did not have “‘a reasonable relationship’” to the total income earned by the employee. The court concluded that the more than $900 daily rate was not reasonably related to the more than $3,000 the employee earned on average each week. Thus, the employee did not qualify for the exemption.

The majority opinion, its concurrence and dissent sparred over the interpretive method of textualism.  The majority opinion relied heavily on the “plain text” of a Department of Labor Regulation – 29 CFR 541.604(b) in reaching its conclusion.  In concurrence, rejecting the pleas of Helix and amici, Judge Ho stated: “Our job is to follow the text—not to bend the text to avoid perceived negative consequences for the business community. That is not because industry concerns are unimportant. It is because those concerns belong in the political branches, not the courts.” Addressing the amici’s arguments that a ruling for the workers would devastate the oil industry, Judge Ho’s concurrence states, “Justice Scalia once wrote: ‘[S]uch questions as ‘Who wins?’ ‘Will this decision help future plaintiffs?’ ‘Will it help future defendants?’ ‘Is this decision good for the ‘little guy’?’ ‘Is it good for business?’ . . . Questions like these are appropriately asked by those who write the laws, but not by those who apply them.’” Judge Ho concluded his concurrence by stating “Amici may be disappointed, but they should not be surprised that the court today rejects their atextualist theories. There’s no such thing as a part-time textualist. If we’re not textualists in every case, then we’re not really textualists at all. We’re not binding ourselves to the text if we follow it only when we like the result. Textualism is either a matter of principle or a talking point. We follow the text where it leads. Here, the text leads the court to side with labor over industry. So be it. I concur.” In dissent, Judge Wiener argued that the majority’s decision was based on a “skewed version of textualism while ignoring or misapplying the history of the exemptions,” and that it “contravenes common sense and provides a detailed but ultimately unnecessary and misguided discussion.” Judge Wiener called the decision and “illogical and unexpected result.”   

It is also interesting to look at the judges who ruled in favor and against the oilfield workers in the Helix II opinion. Of the twelve that sided with the workers, were: a Regan appointee, a Clinton appointee, a Bush II appointee, three Obama appointees. The remaining six – half of the majority – were Trump appointees.  Of the six dissenters who sided with the employer were: a Regan appointee, a Bush I appointee, three Bush II appointees and a Clinton appointee.  So it is fair to say that the Trump appointees were the deciding factor, as all six of them sided with the plaintiff workers on the day rate issue.  That is certainly an “unexpected result” – to borrow a phrase from Judge Wiener’s dissent – given that former President Trump’s judicial nominees have been characterized as being as the most conservative in modern times, and thus presumably the most hostile to labor positions.  Or perhaps the textualism practiced by the Trump appointees is – as Judge Ho describes – an interpretive method that is more concerned about the plain text of the laws and regulations than about which side wins or loses. 

At the end of the day, the en banc panel reached the correct decision.  A day rate is not a salary.  A salary is a guaranteed weekly amount that is paid regardless of whether how much or little the employee works that week.  This is both the common sense understanding of the term as well as the way it is defined by 29 CFR 541.604(b). Day rates do not work this way – day rate workers are only paid if and when they work.  On the weeks day rate employees do not work, they are paid nothing. Thus, their pay is not guaranteed, and they are therefore not paid a salary under the FLSA.  

The upshot of the Helix II decision is that any employees paid day rates may be eligible for overtime pay. Day rates are common in the oilfield industry. If you received day rate pay within the past three years, you should contact an experienced overtime attorney as soon as possible to learn of your legal rights. Josh Borsellino is a Texas attorney that represents workers in overtime cases. Call Josh today at 817.908.9861 or email him by clicking this link for a free evaluation of your legal matter.