Helix Energy Solutions Group, Inc. v. Hewitt, 598 U.S. ___ (2023)
Hewitt filed suit under the Fair Labor Standards Act (FLSA), which guarantees overtime pay to covered employees when they work more than 40 hours a week. From 2014-2017, Hewitt typically worked 84 hours per week on Helix's offshore oil rig, while on the vessel. Helix paid Hewitt a daily rate. Hewitt’s paycheck amounted to his daily rate times the number of days he worked. Hewitt earned over $200,000 annually.
Helix argued that Hewitt was exempt from the FLSA as “a bona fide executive,” 29 U.S.C. 213(a)(1). An employee is considered an exempt bona fide executive if the employee meets the “salary basis” test, which requires that an employee receive a predetermined and fixed salary that does not vary with the amount of time worked, the “salary level” test, and the job “duties” test.
The Supreme Court affirmed the Fifth Circuit. Hewitt was not exempt from the FLSA’s overtime pay guarantee. A daily-rate employee does not fall within the main salary-basis provision of 29 CFR 541.602(a)--the employee regularly receives each pay period a predetermined amount, “not subject to reduction because of variations in the quality or quantity of the work performed.” A daily-rate worker is paid for each day he works and no others. Daily-rate workers, of whatever income level, qualify as paid on a salary basis under 29 CFR 541.604(b) only if an employer also provides a guarantee of weekly payment approximating what the employee usually earns. Reading 602(a) also to cover daily- and hourly-rate employees would subvert 604(b)’s strict conditions on when their pay counts as a “salary.” There is no simple income level test for the exemption.
Supreme Court declines to exempt a highly-compensated worker, paid on a daily basis with no guarantee of a weekly amount, from the Fair Labor Standards Act's overtime pay requirements.
SUPREME COURT OF THE UNITED STATES
Syllabus
HELIX ENERGY SOLUTIONS GROUP, INC., et al. v. HEWITT
certiorari to the united states court of appeals for the fifth circuit
No. 21–984. Argued October 12, 2022—Decided February 22, 2023
Respondent Michael Hewitt filed an action against his employer, petitioner Helix Energy Solutions Group, seeking overtime pay under the Fair Labor Standards Act of 1938, which guarantees overtime pay to covered employees when they work more than 40 hours a week. From 2014 to 2017, Hewitt worked for Helix on an offshore oil rig, typically working 84 hours a week while on the vessel. Helix paid Hewitt on a daily-rate basis, with no overtime compensation. So Hewitt’s paycheck, issued every two weeks, amounted to his daily rate times the number of days he had worked in the pay period. Under that compensation scheme, Hewitt earned over $200,000 annually. Helix asserts that Hewitt was exempt from the FLSA because he qualified as “a bona fide executive.” 29 U. S. C. §213(a)(1). Under applicable regulations, an employee is considered a bona fide executive excluded from the FLSA’s protections if the employee meets three distinct tests: (1) the “salary basis” test, which requires that an employee receive a predetermined and fixed salary that does not vary with the amount of time worked; (2) the “salary level” test, which requires that preset salary to exceed a specified amount; and (3) the job “duties” test. See 84 Fed. Reg. 51230. The Secretary of Labor has implemented the bona fide executive standard through two separate and slightly different rules, one “general rule” applying to employees making less than $100,000 in annual compensation, and a different rule addressing “highly compensated employees” (HCEs) who make at least $100,000 per year. 29 CFR §§541.100, 541.601(a), (b)(1). The general rule considers employees to be executives when they are “[c]ompensated on a salary basis” (salary-basis test); “at a rate of not less than $455 per week” (salary-level test); and carry out three listed responsibilities—managing the enterprise, directing other employees, and exercising power to hire and fire (duties test). §541.100(a). The HCE rule relaxes only the duties test, while restating the other two. As litigated in this case, whether Hewitt was an executive exempt from the FLSA’s overtime pay guarantee turns solely on whether Hewitt was paid on a salary basis. The District Court agreed with Helix’s view that Hewitt was compensated on a salary basis and granted the company summary judgment. The Court of Appeals for the Fifth Circuit reversed, deciding that Hewitt was not paid on a salary basis and therefore could claim the FLSA’s protections. The court so held based on its examination of the two regulations that give content to the salary-basis test. The majority first concluded that a daily-rate employee (like Hewitt) does not fall within the main salary-basis provision of §541.602(a), which states:
“An employee will be considered to be paid on a ‘salary basis’ . . . if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to [certain exceptions], an exempt 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.”
Second, the court held that “daily-rate” workers can qualify as paid on a salary basis only through the “special rule” of §541.604(b), which focuses on workers whose compensation is “computed on an hourly, a daily or a shift basis.” Because Hewitt’s compensation concededly did not satisfy §604(b)’s conditions, the court concluded that Hewitt, although highly paid, was not exempt from the FLSA. Reaching the opposite conclusion, a dissenting opinion determined that Hewitt’s compensation satisfied the salary basis test of §602(a) and that §604(b) is not applicable to employees who fall within the HCE rule.
Held: Hewitt was not an executive exempt from the FLSA’s overtime pay guarantee; daily-rate workers, of whatever income level, qualify as paid on a salary basis only if the conditions set out in §541.604(b) are met. Pp. 7–20.
(a) The critical question here is whether Hewitt was paid on a salary basis under §602(a). A worker may be paid on a salary basis under either §602(a) or §604(b). But Helix acknowledges that Hewitt’s compensation did not satisfy §604(b)’s conditions. And the Court concludes that Helix did not pay Hewitt on a salary basis as defined in §602(a), a conclusion that follows from the text and the structure of the regulations. Pp. 7–17.
(1) The text of §602(a) excludes daily-rate workers. An employee, the regulation says, is paid on a salary basis only if he “receive[s] the full salary for any week in which [he] performs any work without regard to the number of days or hours worked.” Whenever an employee works at all in a week, he must get his “full salary for [that] week”—what §602(a)’s prior sentence calls the “predetermined amount.” That amount must be “without regard to the number of days or hours worked”—or as the prior sentence says, it is “not subject to reduction because” the employee worked less than the full week. Giving language its ordinary meaning, nothing in that description fits a daily-rate worker, who by definition is paid for each day he works and no others. Further, §602(a)’s demand that an employee receive a predetermined amount irrespective of days worked embodies the standard meaning of the word “salary.” The “concept of ‘salary’ ” is linked, “[a]s a matter of common parlance,” to “the stability and security of a regular weekly, monthly, or annual pay structure.” 15 F. 4th 289, 291. Helix responds by focusing on §602(a)’s use of the word “received,” contending that because Hewitt got his paycheck every two weeks, and that check contained pay exceeding $455 (the salary level) for any week in which he had worked, Hewitt was paid on a salary basis. But Helix offers no reason for hinging satisfaction of the salary-basis test on how often paychecks are distributed. And Helix’s interpretation of the “weekly basis” phrase is not the most natural one. A “basis” of payment typically refers to the unit or method for calculating pay, not the frequency of its distribution. And that is how neighboring regulations use the term. The “weekly basis” phrase thus works hand in hand with the rest of §602(a) to reflect the standard meaning of a “salary,” which connotes a steady and predictable stream of pay. Pp. 8–12.
(2) The broader regulatory structure—in particular, the role of §604(b)—confirms the Court’s reading of §602(a). Section §604(b) lays out a second path for a compensation scheme to meet the salary-basis requirement. And that path is all about daily, hourly, or shift rates. An employee’s earnings, §604(b) provides, “may be computed on” those shorter bases without “violating the salary basis requirement” so long as an employer “also” provides a guarantee of weekly payment approximating what the employee usually earns. Section 604(b) thus speaks directly to when daily and hourly rates are “[ ]consistent with the salary basis concept.” 69 Fed. Reg. 22184. Reading §602(a) also to cover daily- and hourly-rate employees would subvert §604(b)’s strict conditions on when their pay counts as a “salary.” By contrast, when read as limited to weekly-rate employees, §602(a) works in tandem with §604(b), with §604(b) taking over where §602(a) leaves off.
Helix’s argument to the contrary relies on the premise that the HCE rule operates independently of §604(b). Even if so, a daily-rate worker like Hewitt is not paid on a salary basis under the plain text of §602(a). And supposing that the HCE rule incorporates only §602(a), and not §604(b), those two provisions still must be read to complement each other because §602(a) cannot change meanings depending on whether it applies to the general rule or the HCE rule. Regardless, Helix is wrong that the HCE rule operates independently of §604(b). The HCE rule refers to the salary-basis (and salary-level) requirement in the same way that the general rule does. Compare §541.601(b)(1) (requiring “at least $455 per week paid on a salary or fee basis”) with §541.100(a)(1) (requiring payment “on a salary basis at a rate of not less than $455 per week”). And the two provisions giving content to that requirement—explaining when a person is indeed paid on a salary basis—are §602(a) and §604(b). So both those provisions apply to both the general and the HCE rule. There is a difference between the HCE and general rule; it just has nothing to do with the salary-basis requirement. That difference instead involves the duties standard, which is more flexible in the HCE rule. Pp. 13–17.
(b) The Court’s reading of the relevant regulations properly concludes this case. Helix urges the Court to consider supposed policy consequences of that reading, but even the most formidable policy arguments cannot overcome a clear textual directive. See BP p.l.c. v. Mayor and City Council of Baltimore, 593 U. S. ___, ___. And anyway, Helix’s appeal to consequences appears less than formidable in the context of the FLSA’s regulatory scheme. Helix’s complaint about “windfalls” for high earners fails, as the HCE rule itself reflects Congress’s choice not to set a simple income level as the test for exemption. As to Helix’s cost-based objections, the whole point of the salary-basis test is to preclude employers from paying workers neither a true salary nor overtime. So too, Helix’s complaints about retroactive liability lack force because the salary-basis test is not novel, but rather traces back to the FLSA’s beginnings. Pp. 17–20.
15 F. 4th 289, affirmed.
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.
Judgment issued. |
Adjudged to be AFFIRMED. 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. |
Argued. For petitioners: Paul D. Clement, Alexandria, Va. For respondent: Edwin Sullivan, Houston, Tex.; and Anthony A. Yang, Assistant to the Solicitor General, Department of Justice, Washington, D. C. (for United States, as amicus curiae.) |
Reply of Helix Energy Solutions Group, Inc., et al. submitted. |
Reply of petitioners Helix Energy Solutions Group, Inc., et al. filed. (Distributed) |
Motion of the Solicitor General for leave to participate in oral argument as amicus curiae, for divided argument, and for enlargement of time for oral argument GRANTED. |
Brief amicus curiae of Massachusetts Nurses Association filed. (Distributed) |
Motion of United States for leave to participate in oral argument and for divided argument submitted. |
Amicus brief of United States submitted. |
Amicus brief of National Nurses United submitted. |
Amicus brief of Massachusetts Nurses Association submitted. |
Amicus brief of American Federation of Labor and Congress of Industrial Organizations submitted. |
Brief amicus curiae of American Federation of Labor and Congress of Industrial Organizations filed. (Distributed) |
Motion of the Solicitor General for leave to participate in oral argument as amicus curiae, for divided argument, and for enlargement of time for oral argument filed. |
Brief amicus curiae of United States filed. (Distributed) |
Brief amicus curiae of National Nurses United filed. (Distributed) |
Motion of United States for leave to participate in oral argument and for divided argument submitted. |
Brief of Michael J. Hewitt submitted. |
Brief of respondent Michael J. Hewitt filed. (Distributed) |
CIRCULATED |
Amicus brief of States of Mississippi, et al. submitted. |
Amicus brief of The Chamber of Commerce of the United States of America submitted. |
Amicus brief of Texas Oil and Gas Association, Inc. and The American Petroleum Institute submitted. |
Brief amicus curiae of The Chamber of Commerce of the United States of America filed. |
Brief amici curiae of Texas Oil and Gas Association, Inc., et al. filed. |
Brief amici curiae of States of Mississippi, et al. filed. |
Amicus brief of Independent Petroleum Association of America submitted. |
Brief amicus curiae of Independent Petroleum Association of America filed. |
Joint Appendix submitted. |
Brief of Helix Energy Solutions Group, Inc., et al. submitted. |
Brief of petitioners Helix Energy Solutions Group, Inc., et al. filed. |
Joint appendix filed (statement of cost filed.) |
Joint appendix filed. |
The record from the U.S.D.C. Southern District of Texas (Houston) has been electronically filed. |
Record requested from the 5th Circuit. |
The record from the U.S.C.A. 5th Circuit is electronic and located on Pacer. |
ARGUMENT SET FOR Wednesday, October, 12, 2022. |
May 26, 2022 motion to extend the time to file the briefs on the merits granted. The time to file the joint appendix and petitioners' brief on the merits is extended to and including July 8, 2022. The time to file respondent's brief on the merits is extended to and including August 31, 2022. |
Motion for an extension of time filed. |
Motion for an extension of time to file the briefs on the merits filed. |
Motion of Helix Energy Solutions Group, Inc., et al. for an extension of time submitted. |
Motion for an extension of time filed. |
Motion for an extension of time to file the briefs on the merits filed. |
Petition GRANTED. |
DISTRIBUTED for Conference of 4/29/2022. |
DISTRIBUTED for Conference of 4/22/2022. |
Reply of petitioners Helix Energy Solutions Group, Inc., et al. filed. (Distributed) |
Brief of respondent Michael J. Hewitt in opposition filed. |
Response Requested. (Due March 21, 2022) |
DISTRIBUTED for Conference of 3/4/2022. |
Brief amici curiae of Independent Petroleum Association of America and Offshore Operators Committee filed. |
Brief amici curiae of Mississippi, et al. filed. |
Brief amici curiae of Texas Oil and Gas Association, Inc. and The American Petroleum Institute filed. |
Waiver of right of respondent Michael J. Hewitt to respond filed. |
Letter of February 7, 2022 pertaining to amicus briefs, received from counsel for the petiitoners. |
Letter of January 25, 2022 pertaining to the corporate discosure statement, received from counsel for the petiitoners. |
Blanket Consent filed by Petitioner, Helix Energy Solutions Group, Inc., et al. |
Petition for a writ of certiorari filed. (Response due February 10, 2022) |