You may recall my post back in September about a Fifth Circuit case overruling a district court. Now for the end of the story. Mr. Hewitt was a supervisor working on an offshore oil rig. He received good pay (over $200,000 a year), but he was paid on a daily rate rather than a weekly, biweekly, monthly, or annual rate. Accordingly, he filed suit (above a putative class action) for overtime pay, but the district court ruled against him.
Mr. Hewitt appealed and Hewitt v. Helix Energy Sols. Grp., 956 F.3d 341 (5th Cir. 2020) resulted. The Fifth Circuit reversed the lower court finding that since Mr. Hewitt was paid on a daily rate rather than a weekly or bi-weekly, or monthly basis regardless of the hours worked. He “…was not paid on a salary basis.” Id. at 344. A petition for writ of certiorari was filed with the United States Supreme Court, and it granted cert.
The Court entertained the argument in October of last year, and the decision was recently released.
The Supreme Court agreed with the Fifth Circuit. While Hewitt was a highly compensated employee with supervisory responsibilities, daily rate workers could only qualify as being paid on a salary basis when they met the requirements of the special rule under 29 CFFR §541.604(b). The requirements of the special rule were not met here. That left the Court to review the requirements under other sections. The sections, including §§600, 601, and 602, linked the concept of salary as being tied to the “stability and security of a regular weekly monthly or annual pay structure.”
The mere fact that Mr. Hewitt received his paycheck every two weeks did not make it a salary since that paycheck could vary based on the number of days that Mr. Hewitt worked. Thus rather than receiving a set amount of money regardless of whether he worked one day or ten days in a two-week timeframe, he only received the daily rate “salary” for each day he worked. This means of payment pushed Mr. Hewitt into the nonexempt category and entitled them to overtime compensation.
The net result here is that a salary must be tied to at least a weekly rate of pay unless meeting the requirements of the special rule. The special rule would require the employer to guarantee that the daily rate employee would receive each week an amount (above $455) “…bearing a ‘reasonable relationship' to the weekly amount he usually earned.
Many employers had their eyes on this case. Some may now be scrambling to adjust their methods of payment. Others may be “asleep at the wheel,” and a class action may be looming. While employers can use many “creative” arrangements to avoid overtime, the daily rate salary is difficult to pass muster.