SCOTUS Weighs In On Day Rate Pay
Wednesday, March 1, 2023

Avid readers of this blog will recall three prior postings about a wage and hour dispute under the Fair Labor Standards Act (“FLSA”) between an off-shore tool-pusher, Michael Hewitt, and his prior employer, Helix Energy Solutions Group, Inc.  As background, those articles can be found here: 

At the core of the dispute was whether Hewitt was entitled to receive an overtime rate for hours worked over 40 in a workweek.  Hewitt maintained that he was owed overtime because he was paid a day rate for his work, and his pay therefore did not satisfy the “salary basis test,” which was required for an exemption from the overtime pay requirements of the FLSA as a “highly compensated employee.”  Hewitt’s day rate pay netted him over $200,000.00 per year—an amount eclipsed by the unpaid overtime, liquidated damages, and attorneys’ fees to which he alleged entitlement under the FLSA.  The prospect of such liability for just one person out of many who were paid on a similar day rate basis across various industries was motivation for Helix to challenge and defeat Hewitt’s claims, and piqued the interest of employers with similar payment methods nation-wide.

On February 22, 2023, after much wrangling between the parties at the trial court level and in the Fifth Circuit Court of Appeals, the Supreme Court of the United States weighed in on Hewitt’s claims and Helix’s defenses.  Helix Energy Sols. Grp., Inc. v. Hewitt, No. 21-984, 2023 WL 2144441 (U.S. Feb. 22, 2023).  The Court concluded that the day rate did not satisfy the salary basis test, and Hewitt was entitled to overtime because a day rate is not a fixed salary paid regardless of the amount of time worked or pay received.  Kagan, J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Sotomayor, Barrett, and Jackson, JJ., joined. Gorsuch, J., filed a dissenting opinion. Kavanaugh, J., filed a dissenting opinion in which Alito, J., joined.  Although there are some limited circumstances under which an employee can receive a “day rate” and still satisfy the salary basis test, for those exceptions to apply, there must be a pre-determined, minimum amount of pay, and a reasonable relationship must exist between the guaranteed amount and the amount actually earned.  Employers can help to ensure that any day rate they provide to employees satisfies these requirements, and therefore the salary basis test, by consulting with counsel.  On the other hand, employers who abandon the day rate scheme altogether and simply pay a salary to employees who otherwise satisfy the duties tests of an overtime exemption can avoid legal battles over whether a day rate satisfies the salary basis test. 

 

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