This week, in Helix Energy Solutions Group v. Hewitt, the United States Supreme Court ruled that a former employee who was paid a daily rate is entitled to overtime pay under Federal law.
The 6-3 decision in favor of the oil rig worker affirms that employers must pay employees for all hours worked under the federal law known as the Fair Labor Standards Act (FLSA). This has significant implications for employers that may rely on day rates to offset overtime costs like the energy, medical staffing, and creative services industries.
Hewitt was a “toolpusher” on an offshore oil rig for Helix Energy Solutions Group. He worked a senior position supervising dozens of workers. From 2014 to 2017, Hewitt worked 28 day “hitches,” which meant he was on duty for 12 hours a day. He was compensated by a daily rate which ranged from $963 to $1,341 per day and was issued a paycheck every two weeks. Under this compensation structure, Mr. Hewitt was paid over $200,000 a year. Despite not being a salaried worker, Hewitt regularly worked 84-hour weeks—well above the 40-hour standard for overtime.
Helix argued Hewitt was a “bona fide executive,” claiming that Hewitt was exempt from overtime pay due to his high annual compensation. To be exempt under the FLSA, however, executives must be paid on a salary basis, meaning their predetermined pay must be “calculated on a weekly, or less frequent basis” and not tied to their hours worked per week. They also must earn at least $100,000 annually and have a minimum pay threshold of $684 per week.
FSLA regulations also recognize that workers paid on an hourly, daily, or shift basis can be classified as salaried, so long as the employer guarantees “at least the minimum weekly-required amount” despite the number of hours, days, or shifts worked. Helix argued that because Hewitt was an executive who received more than the minimum weekly pay, he was exempt from receiving overtime pay.
However, the Court sided with Hewitt, agreeing that Helix never offered him a minimum weekly guaranteed pay, so his day rate earnings cannot be classified as a salary Justice Elena Kagan summarized the case, holding “that such an employee is not paid on a salary basis, and thus is entitled to overtime pay.”
Employers must be aware of the risk and compliance factors of day rates when evaluating which compensation scheme is best for their business. Calculations for compensation of workers must comply with FLSA regulations, guaranteeing the minimum weekly-required amount, should the employer choose to classify an hourly, daily or shift worker as salaried. And HR professionals must ensure that non-salaried employees are being paid for every hour worked.
The Coppola Firm is prepared to assist any employer that may be navigating day rates, overtime, or other compensation questions for their workforce. Reach out anytime for guidance.
