Supreme Court: Day Rate Worker Entitled to Overtime Pay

In a high-stakes, highly-anticipated case, the United States Supreme Court held that an oilfield worker paid a day rate was not exempt from overtime pay.  From 2014 to 2017, Michael Hewitt worked for Helix Energy Solutions Group as a “tool-pusher” on an offshore oil rig. Reporting to the captain, Hewitt oversaw various aspects of the rig’s operations and supervised 12 to 14 workers. He typically 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 vessel. Helix paid Hewitt on a daily-rate basis, with no overtime compensation. The daily rate ranged, over the course of his employment, from $963 to $1,341 per day. 

Hewitt, filed an action against his former employer Helix, seeking overtime pay. The district court granted summary judgment in favor of Helix, finding that Hewitt was exempt because his day rate qualified as a salary, and that he satisfied the “highly compensated employee” exemption, and was thus not entitled to overtime pay. The Fifth Circuit Court of Appeals reversed, finding that day rate workers are not paid on a salary basis.  Other circuit courts had reached an opposite conclusion. In order to resolve this circuit split, the U.S. Supreme Court agreed to hear the case, and to decide whether highly compensated supervisors who are compensated on a daily basis that exceeds the FLSA’s highly compensated threshold and who are paid more than the weekly salary basis amount are exempt from overtime compensation under the FLSA. 

The Supreme Court held that Hewitt was not an executive exempt from the FLSA’s overtime pay guarantee; and that daily-rate workers, of whatever income level, qualify as paid on a salary basis only if the conditions set out in §541.604(b) are met. This means that a day rate worker would only satisfy the salary basis test – and thus be exempt from overtime pay – if an employer “also” provides a guarantee of weekly payment approximating what the employee usually earns. This sort of compensation scheme is exceeding rare – indeed, this author has spoken with hundreds of day rate employees and has never seen such an arrangement.  So virtually all day rate workers are subject to the Supreme Court’s Helix decision.  

Needless to say, the Court’s decision is great news for workers paid on a day rate basis.  It carries immense implications for certain employers, particularly those in the oil and gas industry, where the day-rate compensation scheme at issue is prevalent. This is made clear by the fact that the Independent Petroleum Association of America (“IPAA”) filed an amicus brief with the Supreme Court, arguing in favor of Helix’s position.  The IPAA is a lobbying group that represents over 5,000 independent oil and natural gas producers and service companies across the United States, and spends more than a million dollars per year to lobby congress and federal agencies. The Texas Oil & Gas Association and the American Petroleum Institute also filed amicus briefs in the case, arguing that day rate workers should be exempt from overtime as salaried employees.  The reason why these lobbying firms are spending so much money filing briefs before the Supreme Court is because their members – oil and gas companies – have substantial potential liability in unpaid overtime lawsuits because thousands of their employees and former employees have been paid on a day rate basis over the past several years.  

The upshot of the Supreme Court’s decision is that any employee paid a day rate may be eligible for overtime pay. Day rates are common in the oil and gas 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.  

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