April 3 Tip of the Week
“Details Matter”
Often when dealing with legal issues, it is necessary to balance the equities to arrive at what is thought to be a fair result. While this may seem logical on its face, both federal and state labor and employment laws often contain very specific requirements and language that result in outcomes that do not seem fair – where a balancing of the equities leads to a result that violates the law. The United State Supreme Court recently issued a decision that is an example of such an outcome.
In the case, Helix Energy Solutions Group, Inc. v. Hewitt, 598 U.S. _____ (2023), the Court addressed the issue of whether an oil rig worker who earned more than $200,000 per year was wrongfully denied overtime pay for hours that he worked in excess of 40 in a week. Hewitt was a tool pusher on an offshore oil rig. In this role, Hewitt supervised workers on the rig as part of his responsibilities in overseeing the operations of the oil rig. Hewitt was assigned to work a schedule of 28 days on and 28 days off and, during his 28 days on, he often worked 7 days a week, 12 hours a day. Hewitt’s earnings per day ranged from $963 to $1,341 during the course of his employment. Hewitt was fired from his tool pusher position by Helix Energy Systems and, after he was fired, he filed a claim against the company seeking overtime pay for all hours that he worked in excess of 40 in week while employed by Helix.
Defending itself against Hewitt’s overtime claims, Helix Energy Solutions Group asserted that Hewitt was an exempt employee under the Fair Labor Standards Act and that the highly compensated rules, which relax the duties test for employees earning more than $100,000 per year, applied to his situation. Under the Fair Labor Standards Act, an employee is an exempt employee for purposes of overtime eligibility if they meet both a duties and a salary basis test. Under the duties test, an employee must meet the listed responsibilities set forth in the regulations for the exemption sought and must be paid on a salary basis, meaning that they receive the same amount of pay in each week that they perform any work for the employer. Helix claimed that Hewitt met the requirements for the executive exemption due to his oversight of other employees and that he earned more than $455 per week (the minimum salary required by the regulations). The District Court initially ruled in favor of Helix Energy Solutions Group, finding that, based on his earnings and under the more relaxed duties test for highly compensated employees, Hewitt met the requirements of the executive exemption and was not owed any overtime.
Hewitt appealed the District Court’s decision in the Court of Appeals for the Fifth Circuit. The Fifth Circuit reversed the lower court’s decision, finding that, because Hewitt was paid a daily rate, he was not paid on a salary basis and the requirements of the exemption were not met. Helix appealed this decision to the United States Supreme Court. In reviewing the Fifth Circuit’s decision, the Supreme Court focused on the salary basis test and the specific language of 29 C.F.R. § 541.602(a) of the Fair Labor Standards Act regulations. Under that provision, the law excludes daily rate workers. However, under 29 C.F.R. § 541.604(b), a daily rate worker may qualify as an exempt employee if, even though their pay is calculated on a daily basis, they are guaranteed a predetermined amount of salary that approximates the employee’s usual earnings. Because there was no such guarantee for Hewitt, the Supreme Court ruled that Hewitt was not paid on a salary basis and he was entitled to overtime pay for all hours that he worked in excess of 40 while employed by Helix Energy Solutions Group.
What does this decision, which appears to involve a very unique and specific situation, mean for employers in general? First, it underscores the importance of fully understanding the intricacies and requirements of the labor and employment laws. What an employer believes to be technical compliance with the law is often found to be a violation of the law and those violations can lead to expensive outcomes for an employer. Second, it is important to review your employee classifications to determine whether the individual employees holding those positions truly meet the duties and responsibilities of the exemption applied to them. This review should include a review of the job descriptions for each exempt position and a determination as to whether the job description is a true reflection of the work the employee actually performs. Finally, it is equally important to review your pay practices to ensure that exempt employees are being paid on a salary basis and you are not inadvertently impacting the salary basis nature of an exempt employee’s pay. Any improper deductions from a salaried employee’s wages can destroy the salaried nature of the employee’s pay and result in expensive claims for overtime.
myHRcounsel can assist you in ensuring that you are meeting your legal requirements with respect to exempt employees Our employee handbook service provides employers with legally compliant handbooks that establish work rules and procedures related to employee compensation. Our team of attorneys is available to answer your questions regarding specific employee situations that may involve compliance issues. We can also review your job descriptions and other materials to ensure that the responsibilities described meet the requirements of the exemptions set forth in law.