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Every day Price Staff and Additional time Compensation: Implications of the Supreme Courtroom’s Upcoming Determination in Helix v. Hewitt (US)

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Squire Patton Boggs Summer season Affiliate Wade Erwin discusses the problems in and implications of an FLSA case set to heard by the U.S. Supreme Courtroom in October.

Within the upcoming 2022-2023 time period, the US Supreme Courtroom is ready to resolve in Helix Power Options Group, Inc., et al. v. Hewitt (No. 21-984) whether or not a day by day fee supervisor who earned in extra of $200,000 yearly is entitled to additional time compensation below the federal Honest Labor Requirements Act. Employers that pay their workers day by day charges – notably these within the oil and fuel business – needs to be looking out, and making ready, for the Courtroom’s determination, because it threatens to change the employment compensation panorama considerably and will drive some employers to reshape their compensation schemes solely. Oral argument on this case is presently scheduled for October 12, 2022.

In Helix, the Courtroom will decide whether or not supervisors who sometimes can be exempt from the additional time compensation provisions of the Honest Labor Requirements Act (“FLSA”) are entitled to time-and-a half pay for hours labored over 40 hours in a workweek as a result of they obtain a day by day fee moderately than a hard and fast annual wage. As readers of this weblog are conscious, the FLSA requires employers to pay workers at a fee of one-and-one-half occasions their common fee of pay for any hours they work in extra of 40 hours in a workweek. Though the FLSA applies to broad classes of workers, rules carried out by the U.S. Division of Labor exempt sure workers from these additional time pay necessities. These exceptions apply to workers who’re paid on a wage foundation in an quantity greater than $684/week and who fulfill standards regarding the efficiency of govt, administrative, skilled, pc, and/or outdoors gross sales duties. Additionally they apply to “extremely compensated” workers – those that earn no less than $107,432/yr and are paid on a wage foundation – if the worker usually and recurrently performs no less than one of many duties related to exempt workers.

In Helix, Michael Hewitt labored for Helix as a instrument pusher, managing different workers whereas working offshore on an oil rig. In that function, Hewitt managed roughly a dozen different workers, for which he was paid a large $963 day by day fee for every single day he labored. Though Mr. Hewitt sometimes labored greater than 40 hours per week, his day by day fee remained unaffected by the variety of hours he labored or the standard of the work he carried out. Mr. Hewitt spent two years working for Helix, incomes over $200,000 yearly from 2015 to 2017. After Helix terminated Mr. Hewitt’s employment for performance-related causes, he filed go well with in opposition to the corporate in a Texas federal court docket. In that go well with, Mr. Hewitt alleged that Helix misclassified him as an exempt worker below the FLSA and that he was subsequently entitled to additional time compensation for the hours he labored in extra of 40 hours in a workweek. In response, Helix argued that Mr. Hewitt’s supervisory function and excessive annual earnings introduced him below the FLSA’s “extremely compensated” and “govt” worker exceptions. The trial court docket agreed with Helix, ruling that Mr. Hewitt was exempt from the FLSA’s additional time compensation necessities. The matter was then appealed to the US Courtroom of Appeals for the Fifth Circuit.

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The problem earlier than the Fifth Circuit centered on the wage prong of the “extremely compensated” and “govt” FLSA exemptions. As a result of he was a supervisor who earned over $200,000 a yr, and he all the time made the statutory minimal of $455 every week he labored (which was the wage threshold throughout the years at problem; it’s now $684/week), either side agreed that Mr. Hewitt glad the primary two exemption necessities. The events, nonetheless, fiercely disputed whether or not Mr. Hewitt’s day by day fee certified as fee on a wage foundation.

In a 12-6 en banc determination, the Fifth Circuit held that Mr. Hewitt was not exempt, and subsequently that he was entitled to be paid additional time compensation regardless of his sizable earnings. Emphasizing “‘workers are to not be disadvantaged of the advantages of the [FLSA] just because they’re properly paid,’” the bulk discovered that the plain textual content of the FLSA positioned Mr. Hewitt outdoors the “govt” and “extremely compensated” exceptions. As a result of he labored for a day by day fee and didn’t obtain compensation on weekly or much less frequent foundation – what can be ordinarily thought of a “wage” – the appellate court docket reasoned that Mr. Hewitt wanted to fulfill the wage foundation check to fall inside the additional time exemptions. Nevertheless, below the wage foundation check, Mr. Hewitt needed to obtain a assured weekly fee that was calculated with out regard to the variety of hours, days, or shifts he labored. Moreover, to be exempt from the FLSA’s additional time necessities, the check required {that a} affordable relationship exist between the assured fee and the quantity that Mr. Hewitt truly earned. In keeping with the Fifth Circuit, the affordable relationship commonplace ensures that the minimal weekly assure is just not a sham. By setting a ceiling on how a lot the worker can count on to work in alternate for his common paycheck, the check prevents the employer from claiming that it pays a steady weekly quantity with out regard to hours labored, whereas in actuality recurrently overworking workers in extra of the time the weekly assure contemplates.

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Helix argued that Mr. Hewitt’s day by day fee was a minimal weekly assure, however the Fifth Circuit rejected this argument. As an alternative, it held that the Helix’s compensation plan failed each prongs of the wage foundation check. As an preliminary matter, the court docket reasoned that the day by day fee didn’t qualify as a assured weekly fee as a result of Mr. Hewitt’s pay was, by definition, calculated with regard to the variety of days he labored. The Fifth Circuit additional held that Helix didn’t fulfill the affordable relationship check as a result of Helix paid Mr. Hewitt an “order of magnitude larger” than the minimal weekly assure (that’s, the $963 day by day fee). As a result of Helix’s funds to Mr. Hewitt didn’t meet the wage foundation check, the appeals court docket held that he was not exempt below the FLSA, and subsequently eligible for additional time compensation.

The Fifth Circuit’s holding deepened a circuit cut up on this problem. Whereas the Fifth, Sixth and Eighth Circuits apply the affordable relationship check, the First and Second Circuits adhere to a special interpretation that exempts daily-rate employees below the wage foundation check. To be able to resolve this circuit cut up, the U.S. Supreme Courtroom agreed on Might 2, 2022 to listen to Helix, and is ready to resolve whether or not extremely compensated supervisors who’re compensated each day that exceeds the FLSA’s extremely compensated threshold and who’re paid greater than the weekly wage foundation quantity are exempt from additional time compensation below the FLSA. The Courtroom’s determination will carry immense implications for sure employers, notably these within the oil and fuel business, the place the compensation scheme at problem is prevalent. As briefs submitted within the case spotlight, requiring additional time compensation for extremely paid day by day employees threatens to extend labor prices in oil and fuel exploration and manufacturing business by a minimal of 26.2 p.c. Additional, if the U.S. Supreme Courtroom affirms the Fifth Circuit’s determination, curiosity teams have voiced concern {that a} single worker making $200,000 yearly may very well be entitled to a further $52,000 in again wages. Helix’s impression additionally may unfold throughout industries, affecting the development business, artistic companies firms, and every other employers who pay their workers day by day charges. The Courtroom’s determination in Helix may deliver a brand new class of workers inside the purview of the FLSA’s additional time necessities, and relying on the end result, employers may face elevated legal responsibility for failure to pay additional time compensation. The case may drive firms with extremely compensated day by day fee workers to both make additional time funds or pivot in direction of a assured minimal wage scheme. We are going to proceed to trace the Helix case and can present updates on federal additional time legislation as new data turns into accessible. Within the meantime, employers who pay their workers on a assured day by day quantity foundation ought to evaluate their present pay practices and seek the advice of with counsel to think about whether or not to revise their method prospectively within the occasion of an opposed ruling from the Courtroom.

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