Volume 30, Issue 6: This Report summarizes opinions issued on February 22 and 28, 2023 (Part I); and cases granted review on February 27 and March 6, 2023 (Part II).

Opinion: Helix Energy Solutions Group, Inc. v. Hewitt, 21-984

Helix Energy Solutions Group, Inc. v. Hewitt, 21-984. The Fair Labor Standards Act (FLSA) guarantees covered employees overtime pay when they work more than 40 hours per week. An employee is not covered if he works “in a bona fide executive . . . capacity,” as “defined” by agency regulations. 29 U.S.C. §213(a)(1). Under the regulations, an employee falls within the “bona fide executive” exemption only if (among other things) he is paid on a “salary basis.” 29 C.F.R. §541.100(a)(1) (2015); see id. §541.601(b)(1). By a 6-3 vote, the Court held that “a high-earning employee is [not] 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.” Such an employee, like respondent Michael Hewitt, is therefore “entitled to overtime pay.”

For three years, Hewitt worked for petitioner Helix Energy Solutions Group on an offshore oil rig. He typically worked in 28-day “hitch[es]”—he would work 12 hours a day, seven days a week (a total of 84 hours per week) for 28 days straight, then receive a 28-day break. Helix paid Hewitt a daily rate with no overtime compensation. Based on this compensation scheme, Hewitt earned over $200,00 annually. Hewitt filed an action against Helix in federal district court to recover overtime pay under the FLSA. Helix moved for summary judgment, contending that Hewitt was not entitled to overtime compensation because he qualified as a bona fide executive. Because Hewitt met the other two requirements for this exemption, the only dispute was whether he was compensated on a salary basis. The district court agreed that he was and granted summary judgment to Helix. The Fifth Circuit, sitting en banc, reversed the district court’s judgment by a 12-6 vote, holding that Hewitt was not paid on a salary basis and was thus entitled to overtime pay. In an opinion by Justice Kagan, the Court affirmed.

The Court explained that the Secretary of Labor has implemented the “bona fide executive” exemption through two rules. Under the general rule, an employee is a “bona fide executive” if he is paid on a salary basis, he earns at least $455 per week, and his job responsibilities satisfy a stringent “duties test.” The rule for highly-compensated executives—individuals making more than $100,000 per year—relaxes the duties requirement and restates the other two requirements. Because the parties agreed that Hewitt satisfied the salary-level and duties requirements, the “critical question” was whether he was paid on a salary basis. The Court resolved this question by looking to §602(a) of the agency regulations, which provides that an employee is paid on a “salary basis” if he “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 C.F.R. §541.602(a). The Court explained that the regulation’s text excludes daily-rate employees, like Hewitt, because those individuals are paid based on the number of days worked, rather than a “predetermined amount.” This reading comported with the standard, dictionary meaning of “salary,” which refers to “fixed compensation regularly paid,” as distinct from “wages,” which refers to “pay given for labor at short stated intervals.” (Cleaned up). The Court rejected Helix’s less “natural” reading of the regulation as referring to the frequency with which an employee receives his paycheck—in Hewitt’s case, bi-weekly—rather than to the unit of time based on which the employee is paid.

The Court added that its reading of §602(a) was confirmed by the regulations’ broader structure. In particular, §604(b) provides that an employee can be paid a “daily” rate yet still be paid on a “salary basis” if (1) he is guaranteed at least $455 per week, and (2) the “guaranteed amount” bears a “reasonable relationship” to the “amount actually earned.” 29 C.F.R. § 541.604(b). Helix conceded that it did not satisfy these conditions when compensating Hewitt. Nevertheless, §604(b) was relevant to the Court’s analysis because it directly addressed when daily rates are “‘[ ]consistent with the salary basis concept,’” thereby “reinforc[ing] the exclusion of those shorter rates from §602(a)’s domain.” (Alteration in original.) Although Helix contended that §604(b) was irrelevant because it did not apply to highly-compensated employees, like Hewitt, the Court rejected that premise and explained that, regardless, §§602(a) and 604(b) must be read as a whole, and §602(a)’s meaning cannot differ based on whether an employee is highly compensated. Finally, the Court rejected Helix’s policy arguments, which could not overcome the regulation’s clear text and ignored that his reading of the regulations would “produce troubling outcomes” by denying overtime pay to daily-rate employees compensated less than Hewitt.

Justice Gorsuch filed a dissenting opinion, stating he would dismiss the case as improvidently granted. In his view, the Court did not grant certiorari on the question of §602(a)’s operation, which the parties also did not brief in detail. Helix, moreover, had waited until argument to raise the important, “larger statutory” concern of whether the agency regulations were consistent with the operative statute.  Justice Kavanaugh also filed a dissenting opinion, which Justice Alito joined, agreeing with Helix’s reading of the regulations. To start, Justice Kavanaugh read §602(a) as requiring only that an employee be paid a “predeterminate amount”—more than $455—as “part” of his weekly compensation. Hewitt satisfied that requirement because his daily rate was $963, so at least “part” of his guaranteed weekly compensation exceeded $455. Moreover, Justice Kavanaugh agreed that §604(b) did not apply to highly-compensated employees and was thus irrelevant. Finally, he noted that the regulations may be inconsistent with the FLSA.