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GeneralInsightByrona J. Maule

Day Rate: Clarity For the Oil and Gas Industry May Be On The Horizon

By June 13th, 2022No Comments
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By Byrona Maule

Portrait of Byrona J. Maule

Byrona J. Maule

On May 2, 2022, the U.S. Supreme Court granted a petition in Hewitt v. Helix Energy Solutions Group [15 F.4th 289 (5th Cir. 2021), cert. granted, (May 2, 2022) (No. 21-984)], ostensibly to decide if an oil worker who received a day rate, which results in annual income in excess of the Fair Labor Standards Act (“FLSA”) minimum salary basis for exempt status, is entitled to overtime. Under the FLSA, an employee is exempt from overtime requirements if the employee is in a professional, administrative, or executive position, meets a duties test, and receives a weekly salary in excess of $684 a week. These exemptions are commonly referred to as the white-collar overtime exemption. To qualify for the white-collar exemption, the FLSA requires that the employee be paid on a salary basis, which means the employee receives the same amount each week regardless of how many days or hours the employee works.

Hewitt was paid on a day rate – a pay arrangement which pays the employee a set amount for each day the employee works, regardless of the number of hours the employee works. Thus, the employee may receive more in one week than another based on the number of days the employee works. Day rates have long been the preferred method of payment for the oil and gas industry. Many of the employees in the oil and gas industry make well in excess of $200,000 – as did Mr. Hewitt – well in excess of the minimum salary basis which was $23,660 a year at the time of his lawsuit. Currently, the minimum salary basis is $35,568 a year or $684 a week.

The Fifth Circuit, in an en banc decision (meaning all 18 judges decided the case) held that, in order to qualify for the white-collar exemption, the employee must not only perform certain duties but must also be paid on a salary basis – and a day rate is not a salary basis.  Thus, the Fifth Circuit found that Hewitt was not paid on a salary basis and was therefore not exempt from the overtime requirements under the white-collar exemption.

In reaching its decision, the Fifth Circuit applied a close textual reading of the FLSA readings stating, “respect for text forbids us from ignoring text. As a matter of plain text, we hold that, when it comes to daily-rate employee like Hewitt, Helix must comply with § 541.604(b)[1].” It will be interesting to see what the Supreme Court does with this decision – whether it will read the regulations and apply the same close textual reading of the FLSA regulations, or whether it will take a different approach in interpreting the long standing FLSA regulations on overtime.

The case should be closely monitored by the oil and gas industry, as well as all industries which utilize a day rate.  The Supreme Court could finally clarify the salary basis requirement and how it relates to, and/or applies to, the day rate payment arrangement.

In addition to providing clarity on this issue, it could also give insight a to whether the Supreme Court is going to be textualist in its application of the law.  As US Circuit Judge James C. Ho wrote in his concurrence with the Fifth Circuit opinion, the dissenters and industry groups focused on the fact it was absurd to hold that employees who make as much as Hewitt are entitled to overtime, however:

Amici may be disappointed, but they should not be surprised that the court today rejects their atextualist theories.

There’s no such thing as a part-time textualist. If we’re not textualists in every case, then we’re not really textualists at all.

[1] 29 CFR 541.604(b) provides in pertinent part, that the employee will be exempt if the employment arrangement “also includes a guarantee of at least the minimum weekly arrangement required amount paid on a salary basis regardless of the number of hours, days or shifts worked…”

Byrona J. Maule is a Director, litigation attorney and Chair of the Firm’s Labor and Employment Practice Group. She represents business clients in the full scope of labor and employment matters, ensuring their compliance before various state and federal regulatory boards.

For more information on how the information in this article may impact your business, please call 405.552.2453 or email Byrona J. Maule.

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