Hewitt v. Helix Energy Solutions Grp., Inc.

• Decision Date: 21 December 2020
• Docket Number: No. 19-20023,19-20023
• Citation: 983 F.3d 789
• Parties: Michael J. HEWITT, Plaintiff—Appellant, v. HELIX ENERGY SOLUTIONS GROUP, INCORPORATED; Helix Well Ops, Incorporated, Defendants—Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

983 F.3d 789

Michael J. HEWITT, Plaintiff—Appellant,

v.HELIX ENERGY SOLUTIONS GROUP, INCORPORATED; Helix Well Ops, Incorporated, Defendants—Appellees.

No. 19-20023

United States Court of Appeals, Fifth Circuit.

FILED December 21, 2020

Edwin Sullivan, Esq., Oberti Sullivan, L.L.P., Houston, TX, for Plaintiff—Appellant.

Michael Carter Crow, Kimberly Frances Cheeseman, Katherine D. Mackillop, Esq., Jesika Jasmine Silva Blanco, Norton Rose Fulbright US, L.L.P., Houston, TX, for Defendants—Appellees.

Robert Peter Lombardi, Esq., Kullman Firm, New Orleans, LA, for Amici Curiae Independent Petroleum Association of America, and Offshore Operators Committee.

David B. Jordan, Littler Mendelson, P.C., Houston, TX, for Amicus Curiae Texas Oil & Gas Association, Incorporated.

Before Wiener, Higginson, and Ho, Circuit Judges.

James C. Ho, Circuit Judge:

Our prior opinion in this case is withdrawn, and the following is substituted in its place. The petition for rehearing en banc remains pending.

* * *

The Fair Labor Standards Act establishes a standard 40-hour work week by requiring employers to pay a 50 percent overtime penalty for any time worked over 40 hours per week. See 29 U.S.C. § 207(a). Many people do not think of overtime pay as a penalty on the employer, but as a benefit to the employee. But that is not the only way—and perhaps not even the proper way—to understand the Act. Historically, the FLSA has been understood to "reduce unemployment," as well as to protect workers from excessive hours, by encouraging employers to hire two workers to work 40 hours rather than one worker to work 80 hours. Hence the use of the term "penalty." See , e.g. , Mechmet v. Four Seasons Hotels, Ltd. , 825 F.2d 1173, 1176 (7th Cir. 1987) (Posner, J.) (explaining that Congress enacted the FLSA in part "to spread work and thereby reduce unemployment, by requiring an employer to pay a penalty for using fewer workers to do the same amount of work as would be necessary if each worker worked a shorter week"). See also Overnight Motor Transp. Co. v. Missel , 316 U.S. 572, 577, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942) ("[O]ne of the fundamental purposes of the Act was to induce worksharing and relieve unemployment by reducing hours of work.") (quotations omitted).

These principles apply, of course, only to those workers who are in fact covered by the Act. Congress exempted "bona fide executive, administrative, [and] professional" employees from the overtime laws. 29 U.S.C. § 213(a)(1). And it expressly authorized the Secretary of Labor to promulgate regulations to further "define[ ] and delimit[ ]" those terms. Id.

This case involves a worker who is purportedly an "executive" employee under the regulations—and a "highly compensated" one at that, earning over $200,000 per year. See 29 C.F.R. § 541.100 (executive employees); id. § 541.601 (highly compensated employees). But the precedent we establish here will equally govern lower paid "administrative" and other employees as well, who receive "not less than $684 per week," or $35,568 per year. See id. § 541.200 (administrative employees).

That is because this appeal turns on a legal question common to all executive, administrative, and professional employees—and to the modestly and highly compensated alike: whether a worker is paid "on a salary basis" under § 541.602. See id. § 541.100(a)(1) ; id. § 541.200(a)(1); id. § 541.300(a)(1); id. § 541.601(b)(1). (The regulations also exempt employees paid on a "fee basis," but that is not an issue in this appeal.)

Helix Energy Solutions Group paid Michael Hewitt a daily rate. Under the regulations, an employee whose pay is computed on a daily basis—rather than on a weekly, monthly, or annual basis—could in theory be regarded as paid on a "salary basis" under § 541.602. But the regulations are explicit that special rules apply when it comes to daily rate workers:

An exempt employee's earnings may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.

Id. § 541.604(b) (emphasis added).

So a daily rate worker can be exempt from overtime—but only "if" two conditions are met: the minimum weekly guarantee condition and the reasonable relationship condition. The employer here does not even purport to meet both of these conditions. Instead, the employer candidly asks us to ignore those conditions.

But "if" means "if"—not "irrespective of." And respect for text forbids us from ignoring text. Respect for text thus requires us to hold that Helix is subject to the requirements of § 541.604(b). We accordingly reverse and remand for further proceedings.

I.

Hewitt worked as a tool pusher for Helix for over two years. In that position, Hewitt managed other employees while on a "hitch"—that is, while working offshore on an oil rig. Each hitch lasted about a month. According to the summary judgment record, Helix paid Hewitt based solely on a daily rate.

Helix concedes that it required Hewitt to work over forty hours per week. Helix nevertheless attempts to avoid the FLSA overtime penalty by characterizing Hewitt as either an executive or highly compensated employee—both of which are exempt from the FLSA overtime requirements. See id. § 541.100 (executive employees); id. § 541.601 (highly compensated employees).¹

To prevail under either formulation, Helix must show that it paid Hewitt on a "salary basis" as defined by the regulations. Id. §§ 541.100(a)(1), .600(a), .601(b)(1). (Alternatively, Helix could attempt to invoke the highly compensated employee exemption by showing that it paid Hewitt on a "fee basis"—but it has made no such argument in this appeal. See id. §§ 541.601(b)(1), .605.)

Hewitt contends that Helix did not pay him on a "salary basis" because the company calculated his pay using a daily rate but did not satisfy the requirements of § 541.604(b). Helix responds that it was not required to comply with § 541.604(b).

The district court agreed with Helix and granted the company summary judgment. Hewitt v. Helix Energy Sols. Grp. , 2018 WL 6725267, at *3–*4 (S.D. Tex. Dec. 21, 2018). This appeal followed. We review the district court's interpretation of the applicable Labor Department regulations de novo. See Davis v. Signal Int'l Texas GP, L.L.C. , 728 F.3d 482, 488 (5th Cir. 2013).

II.

There are multiple components to the salary basis test, as articulated in various Labor Department regulations. There is the "[g]eneral rule"—and then there are various exceptions and provisos to that general rule. To properly understand and apply the salary basis test, we must examine not only the general rule, but also any exceptions or provisos that bear upon a particular fact pattern—such as the daily rate issue presented in this appeal.

A.

The "[g]eneral rule" begins as follows: "An employee will be considered to be paid on a ‘salary basis’ within the meaning of this part 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." 29 C.F.R. § 541.602(a) (emphasis added). The general rule further provides that "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 ." Id. § 541.602(a)(1) (emphasis added).

The emphasis on being paid "on a weekly, or less frequent basis"—and "without regard to the number of days or hours worked"—begs the question: What if an employee's compensation is computed on a daily basis—rather than on a weekly, monthly, or annual basis? In other words, what if the employee is not paid "on a weekly, or less frequent basis," but instead with "regard to the number of days or hours worked"?

In sum: Can a daily rate employee ever be regarded as being paid on a "salary basis" and therefore exempt from overtime pay under the FLSA?

To answer that question, we must look beyond the "[g]eneral rule," and turn instead to one of the provisos promulgated by the Secretary. And as it turns out, the answer is yes—a daily rate employee can qualify under the salary basis test—but only "if" certain other conditions are met.

The Sixth and Eighth Circuits have so held. And we agree: "The text of § 541.602(a) does not tell us what to do when an employee's salary is not clearly calculated ‘on a weekly, or less frequent basis.’ " Hughes v. Gulf Interstate Field Servs. Inc. , 878 F.3d 183, 189 (6th Cir. 2017). Instead, we must turn to a "helpful" "neighboring provision"—namely, § 541.604(b). Id. Similarly, the Eighth Circuit concluded that the "general definition" of salary basis as set forth in § 541.602(a) is "subject to numerous interpretive rules." Coates v. Dassault Falcon Jet Corp. , 961 F.3d 1039, 1042 (8th Cir. 2020). And the first example that circuit gave was § 541.604(b). See id. (quoting § 541.604(b)); see also id. at 1048 (relying on Hughes and § 541.604(b)).

So we turn to § 541.604(b). That regulation makes clear that an employer can pay an exempt employee an amount "computed on ... a daily ... basis, without losing the exemption or violating the salary basis requirement." 29 C.F.R. § 541.604(b). But that is so only "if" two conditions are met. Id. Those conditions are as follows: First, "the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked." Id. Second, "a reasonable relationship exists between the guaranteed amount and the amount actually earned." Id .

This two-prong test protects employees in two ways. First, the "minimum weekly" guarantee ensures that a daily rate employee still receives a guaranteed amount...