on Feb 23, 2023
at 2:25 pm
The basic rule is simple: If you earn an hourly wage and you work more than 40 hours in a week, you are probably entitled to “time and a half” overtime pay. But that widely known formula can give way to complexity, as it did in Helix Energy Solutions Group v. Hewitt, a case about whether plaintiff Michael Hewitt is owed overtime pay by his former employer. After parsing detailed regulatory language, a six-justice majority sided with Hewitt; the opinion, authored by Justice Elena Kagan, ultimately turns on the intuitive conclusion that someone who earns a day-rate is not paid on a “salary basis.”
Oil-rig employees like Hewitt work “hitches”; for Hewitt, a hitch was 28 consecutive 12-hour days, for which he was paid at least $963 per day – but no overtime pay, even though he routinely worked 84 hours per week. Hewitt sued, and Helix asserted that Hewitt fell under the Fair Labor Standards Act’s exemption for “bona fide executive, administrative, or professional” (EAP) employees.
Department of Labor regulations define this exemption in two ways. First, an employee is an exempt EAP if they are paid on a salary basis, if the salary exceeds a minimum threshold, and if their job duties align with a relatively stringent “duties test.” Alternatively, a “highly compensated employee” (HCE) is exempt as long as they perform at least one job duty that qualifies as executive, administrative, or professional, and if – as of when Hewitt worked for Helix — they earn at least $100,000 per year, including “at least $455 per week paid on a salary or fee basis.” Both parties agreed that Hewitt performed at least one executive duty, and that he earned over both thresholds. That left one question: whether Hewitt was paid on a “salary basis.”
“Salary basis” is defined in another regulation, referred to as Section 602: The employee must “regularly receive each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation,” regardless of the quantity or quality of work. Further, the employee “must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.”
This language, Kagan wrote, simply did not fit “a daily-rate worker, who by definition is paid for each day he works and no others.” That view, Kagan continued, was consistent with Webster’s dictionary, which defined “salary” as “fixed compensation regularly paid, as by the year, quarter, month, or week.”
Accordingly, the majority rejected Helix’s argument that Section 602 was satisfied because Hewitt received his paycheck on a bi-weekly basis. To illustrate that this reading was not the most natural one, Kagan returned to a hypothetical she raised at oral argument: A lawyer who asks to “receive her pay on an hourly basis” “is proposing an hourly billable rate, not delivery of a paycheck every hour.”
Next, Kagan addressed the relevance of another regulation, referred to as Section 604, which allows some employees who are paid a day-rate to nonetheless be treated as salaried. Helix conceded that Hewitt’s pay did not qualify for this provision, which applies only to pay arrangements that “include a guarantee of at least [$455] paid on a salary basis regardless of the number of … days … worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.” But Helix also argued that this regulation did not harm its case, because it did not apply to HCEs. The majority rejected this premise, but also observed that this regulation still “confirms that plain-text, weekly-rate-only reading” of Section 602. This is because – at a minimum – the two provisions must be read in harmony outside of the HCE context, and Section 602 cannot mean two different things depending on whether the employee to which it is being applied is an HCE.
Finally, having concluded that the regulatory text was clear, the majority rejected Helix’s policy arguments that high earners should not receive “windfalls” in the form of overtime. Here, the majority cited two briefs filed by nurses’ unions, observing that their members could lose overtime pay under Helix’s reading of the statute.
Three justices dissented in two opinions. First, Justice Neil Gorsuch observed that while the court had granted certiorari to decide how the regulatory provisions governing HCEs interacted with Section 604, the case ultimately turned on whether a day-rate worker was paid a salary. Accordingly, he would have dismissed the case as improvidently granted.
Second, Justice Brett Kavanaugh, joined by Justice Samuel Alito, dissented because they agreed with Helix’s reading of Section 602. They focused on the fact that Hewitt’s day rate was higher than the $455 weekly threshold; in any week in which he worked, he was guaranteed to earn at least $963. Of course, when Hewitt worked more than one day in a week, he earned more than $963 – but, the dissenters continued, the salary-basis definition allows the “predetermined amount” to be “part” of the employee’s compensation. Additionally, they agreed with Helix that Section 604 did not apply to HCEs, and that it was not otherwise relevant to the case.
This decision is a victory for Hewitt, but it is unlikely to put an end to litigation over whether highly paid day-rate workers are entitled to overtime. At argument, Helix suggested that the salary-basis requirement was inconsistent with the statutory language. The court did not address this argument, concluding it had been waived – but Kavanaugh and Alito tipped their hands, writing that it was “especially dubious for the regulations to focus on how an employee is paid.”