An oil rig worker at Helix Energy working over 40 hours per week and earning more than $200,000 annually should receive overtime pay, the US Supreme Court ruled on Wednesday.
The ruling sets a precedent that could have ramifications for all rig workers paid on a day-rate basis under US law.
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A lawyer for Helix Energy Solutions Group had argued in October that employee Michael Hewitt was not entitled to overtime pay under the US Fair Labour Standards Act (FLSA), despite frequently working 84-hour weeks.
The FLSA guarantees that covered employees receive overtime pay when they work over 40 hours per week. However, the act does not cover employees if they work “in a bona fide executive position”, and therefore they could not claim to overtime compensation. An employee is determined a “bona fide executive” if he receives a “predetermined and fixed salary”.
The case therefore hinged on the issue of whether Hewitt’s biweekly paycheck constitutes a “salary”. “The critical question here is whether Hewitt was paid on a salary basis under section 602(a) of the Secretary’s regulations. Indeed, the parties have taken all other issues off the table” the 6-3 majority opinion, written by Justice Elena Kagan, said.
Helix Energy had argued that the employee is classified as a “bona fide executive” on a high salary, and is as a result not entitled to overtime. This is despite Hewitt’s pay being based on a daily rate multiplied by the number of days he worked in a given period.
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By GlobalData“The question here is whether a high-earning employee is compensated on a “salary basis” when his paycheck is based solely on a daily rate—so that he receives a certain amount if he works one day in a week, twice as much for two days, three times as much for three, and so on”, the opinion read.
The Court concluded that “we hold that such an employee is not paid on a salary basis, and thus is entitled to overtime pay.”
“An enormous windfall for workers”
Hewitt’s lawyer Ed Sullivan said via Reuters that “my client and team are appreciative that the Supreme court applied the plain text of the law to this case”.
Oil and gas trade groups have backed Helix in the case, saying that a ruling in favour of Hewitt would invite a surge in lawsuits from already highly paid workers on daily rates.
“This decision could result in an enormous windfall for workers in a variety of occupations,” New York City employment attorney Lou Pechman told CNBC, adding that “the Supreme Court has sent a message to all workers paid on a day-rate basis that they are entitled to overtime after 40 hours of work”.
Justices Brett Kavanaugh and Samuel Alito said in a dissent that because Hewitt had a daily predetermined minimum pay rate of $963 per day he should be considered a “bona fide executive”. Justice Neil Gorsuch filed a separate dissent arguing that the case should have been accepted by the court altogether.
“This case highlights one of the quirks about the FLSA, in that sometimes liability is not a result of how much a worker gets paid but rather how he is paid”, Pechman said.
