The Supreme Court agreed this week to hear an appeal from the United States Court of Appeals for the Fifth Circuit brought by an employer who seeks review of a lower court decision that held that the employer owed overtime to a highly compensated managerial employee because his compensation was based on a flat daily rate in the absence of an expressly stated fixed weekly amount of pay. The two sides in the case essentially hinge on differing interpretations of the Department of Labor’s “salary basis” regulations. Both sides are adamant that the “plain text” of one provision or the “plain terms” of another compel their favored result. See Hewitt v. Helix Energy Sols. Grp., Inc., 15 F.4th 289 (5th Cir. 2021).

This case arises out of a claim by a “tool pusher” employed on an offshore drill rig operated Helix Energy Solutions Group, Inc. (“Helix”). In the oil and gas industry, a tool pusher is a fairly senior, experienced drill rig worker who supervises a dozen or so other workers and performs a number of administrative and managerial tasks. This particular employee was paid $963 per day for each day he worked on the rig during a “hitch,” which is a period of time on the rig that lasts about a month. Over the course of a year, the employee was paid roughly $200,000.

The employee claimed he was entitled to overtime pay for all work weeks in which he worked more than 40 hours—something that apparently was common given the nature of the work. Helix denied liability claiming that the employee was exempt from the overtime pay obligations of the Fair Labor Standards Act (“FLSA”) under what is known as the Highly Compensated Employee (“HCE”) exemption.

The FLSA requires employers to pay overtime to certain employees for working more than 40 hours in a week. 29 U.S.C. § 207(a). Some employees, such as executives, administrative workers, or professionals, are exempt from FLSA coverage and are not required to be paid overtime if their duties satisfy the tests for those exempt categories. 29 U.S.C. § 213(a). However, an employee may be exempt under the “highly compensated employee” exemption if (1) the employee’s “primary duty includes performing office or non-manual work”; (2) the employee receives total annual compensation of at least $107,432 (currently); and (3) the employee “customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.” 29 C.F.R. § 541.601. The HCE exemption is premised on the notion that “a high level of compensation is a strong indicator of an employee’s exempt status, thus eliminating the need for a detailed analysis of the employee’s job duties” to assess whether he or she is exempt under the more fulsome tests of the executive, administrative, or professional exemptions.” Id. § 541.601(c).

While there was no dispute that the employee easily surpassed the compensation and duties requirements of the HCE exemption, he and the employer fiercely disagreed over whether he was paid on a salary basis—a key element of eligibility for the exemption. That test provides that “[a]n employee will be considered to be paid on a salary basis” if he or she receives a “predetermined amount” that constitutes all or part of the employee’s compensation on a weekly or less frequent basis “without regard to the number of days or hours worked.” 29 C.F.R. § 541.602(a). The minimum weekly amount presently is $684 per week.

As I pointed out above, this employee was a paid a fixed amount of $963 per day; however, there was no predetermined amount of pay for a week. This is where the dispute focused—can a person who is guaranteed an amount of pay per day regardless of the number of hours worked on that day satisfy the salary basis test if that amount exceeds the minimum weekly requirement of $684 per week. The employee argued (and a majority of Judges on the Fifth Circuit agreed), that a separate regulation, 29 C.F.R. § 541.604, provides that the daily rate can’t satisfy the weekly pay requirement unless the employee is also guaranteed a minimum weekly amount and there is a “reasonable relationship . . . between the guaranteed amount and the amount the employee actually earned.” 29 C.F.R. § 541.604(b).

The employer (plus five states and numerous oil and gas industry allies) plainly were flummoxed by the notion that a person can be entitled to overtime when they earn $200,000 a year and perform, not just one but a number, of exempt duties. They contended and the dissenters concurred that the issue begins and ends with the question of whether there is any predetermined amount that is guaranteed to be paid in a workweek so long as that amount exceeds the statutory minimum. They contended that, under the “plain terms” of the salary basis test, a guaranteed minimum payment of $963 (nearly $300 in excess of the $684 minimum) for performing any amount of work on a single day satisfied the minimum payment amount. To them, it mattered not whether the threshold amount was achieved by a daily rate or a weekly rate. This is because the minimum amount would be exceeded by performing any amount of work on a single day during the work week.

So, the choice between the two “clear” interpretations of this aspect of the salary basis test is now on the Supreme Court’s docket. We’ll look for further developments later this year.