983 F.3d 789
5th Cir.2020Background
- Plaintiff Michael Hewitt worked as a tool pusher for Helix, paid a predetermined daily rate (reported at about $963/day) while working month-long offshore "hitches," and earned over $200,000/year.
- Helix required Hewitt to work more than 40 hours/week but characterized him as exempt from FLSA overtime pay (executive or "highly compensated" exempt employee).
- Hewitt argued he was not paid "on a salary basis" because his pay was computed solely by a daily rate and Helix did not meet 29 C.F.R. § 541.604(b)’s two requirements (minimum weekly guarantee and reasonable relationship between guarantee and earnings).
- The district court granted summary judgment to Helix; Fifth Circuit reviewed the regulatory interpretation de novo.
- The Fifth Circuit majority held that a daily-rate worker can only qualify as paid on a salary basis under § 541.602 by satisfying § 541.604(b)’s two-prong test, and that § 541.604(b) applies to highly compensated employees under § 541.601; the court reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a worker paid solely by a daily rate qualifies as paid "on a salary basis" under 29 C.F.R. § 541.602 without meeting § 541.604(b) | Hewitt: a daily-rate pay system that lacks the § 541.604(b) minimum weekly guarantee and reasonable-relationship protection is not a salary basis and thus not exempt | Helix: daily-rate pay can satisfy salary-basis test without complying with § 541.604(b) (or § 541.601 makes § 541.604(b) inapplicable) | The salary-basis definition requires application of § 541.604(b) for daily-rate employees; Helix did not satisfy those requirements, so exemption not established as a matter of law (reversed/remanded) |
| Whether § 541.604(b)’s requirements apply to "highly compensated employees" under § 541.601 | Hewitt: § 541.601 requires pay to include weekly amounts "paid on a salary basis," so daily-rate workers must meet § 541.604(b) | Helix: a worker meeting § 541.601 need not satisfy § 541.604(b); § 541.601 does not mention § 541.604(b) | The court held § 541.601 still requires the salary-basis test (per § 541.602), and § 541.604(b) governs daily-rate pay; thus § 541.604(b) applies to highly compensated employees paid by day |
| Whether summary judgment for Helix was appropriate | Hewitt: factual record does not show compliance with § 541.604(b) or other exempt-basis defenses | Helix: record supports that Hewitt was exempt as highly compensated/salaried | Court reversed the grant of summary judgment and remanded for further proceedings (including possible fee-basis or other defenses) |
Key Cases Cited
- Mechmet v. Four Seasons Hotels, Ltd., 825 F.2d 1173 (7th Cir. 1987) (historical purpose of FLSA includes encouraging worksharing)
- Overnight Motor Transp. Co. v. Missel, 316 U.S. 572 (U.S. 1942) (one purpose of FLSA was to induce worksharing and reduce hours)
- Hughes v. Gulf Interstate Field Servs., Inc., 878 F.3d 183 (6th Cir. 2017) (daily-rate employees must satisfy § 541.604(b) to meet salary-basis test)
- Coates v. Dassault Falcon Jet Corp., 961 F.3d 1039 (8th Cir. 2020) (applying § 541.604(b) and agreeing with Hughes)
- Anani v. CVS Rx Servs., Inc., 730 F.3d 146 (2d Cir. 2013) (held reasonable-relationship test not required where weekly guaranteed salary already satisfied; distinguishes weekly-guarantee cases)
- Litz v. Saint Consulting Grp., Inc., 772 F.3d 1 (1st Cir. 2014) (similar to Anani; weekly guarantee satisfied salary-basis test)
- Brock v. Claridge Hotel & Casino, 846 F.2d 180 (3d Cir. 1988) (an employee is not salaried if usual weekly income far exceeds the employer's claimed salary guarantee)
- Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (U.S. 2018) (courts must follow text of regulations, not judge-made policy preferences)
- Barnhart v. Sigmon Coal Co., 534 U.S. 438 (U.S. 2002) (courts should not rewrite regulatory text to accommodate policy preferences)