Co-author Marcus Fettinger

Under the Fair Labor Standards Act, what is required for an employee to be exempt from overtime pay? Ordinarily, it’s a guaranteed minimum salary. As the Department of Labor has explained, being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined salary cannot be reduced because of variations in the quality or quantity of the employee’s work.

That seems straightforward, but it took the Fifth Circuit three rounds of deliberations to nail it down. The entire panel of the Court recently reconsidered a 2020 opinion in Hewitt v. Helix Energy Solutions Group, Inc. In its majority opinion, 12 of the 18 judges held that a daily rate can qualify as a salary if, and only if, the employer pays a minimum of $684 per week regardless of the amount that the employee works and a “reasonable relationship” exists between the minimum salary and the total amount paid.

Helix employed Hewitt as a tool pusher on an offshore oil rig for over two years. Helix paid Hewitt about $1,000 per day for every day that he worked and classified him as an exempt employee under the highly-compensated employee exemption. Hewitt contested his classification status and sued for unpaid overtime wages under the Fair Labor Standards Act.

The majority ruled that Hewitt did not meet the salary-basis requirement because Helix paid him “a daily rate without offering a minimum salary,” and Helix paid Hewitt an “order of magnitude greater” than his daily rate.

Judge Ho wrote both the majority and concurring opinions. The opening sentence of his concurring opinion makes clear that this case caused tempers to flare and that it sharply divided the Court. In discussing the dissenting opinion, Judge Ho noted that “[t]he dissent begins by expressing ‘due respect’ to the majority—and then ends with a well-known literary quote about idiots.”

In the dissent, Judge Wiener – who was “born, bred, and educated in the ‘oil patch,’ and [] practiced mineral law for decades” – based his opinion on “common sense” in finding that an employee whose salary totals more than $200,000 per year is not entitled to the overtime protections of the law. Judge Wiener ended his dissent by describing Judge Ho’s concurring opinion with a quote from Shakespeare’s Macbeth: “full of sound and fury, signifying nothing.”

This case is significant. A day rate is standard practice and is lucrative for many employees. Requiring companies to pay a guaranteed weekly salary regardless of the number of days worked will cause companies to rethink their pay practices.

Your musical interlude.