On Tuesday, May 25, 2021, the full Fifth Circuit heard oral arguments in Hewitt v. Helix Energy Solutions Group Inc. This is a case to keep your eye on as the Fifth Circuit’s decision has wide-ranging implications for many in the oil and gas industry.
Hewitt, a tool pusher with responsibility for overseeing workers on an offshore oil rig, filed suit in 2017 seeking unpaid overtime compensation. The singular, and now much litigated, issue in the case is whether a flat day rate is the equivalent of a weekly salary for purposes of meeting the FLSA’s salary basis requirement to be exempt from overtime. Hewitt is arguing that his day rate – which was $963 and well above the $455 weekly minimum at the time – was not a guaranteed salary because it was contingent on the number of days worked. Helix claims that Hewitt was properly paid and received a guaranteed salary above the statutory weekly minimum.
A federal district court originally agreed with Helix. On appeal, a panel of the Fifth Circuit reversed the district court and unanimously agreed with Hewitt in April 2020. The panel ultimately reasoned that to meet the salary basis requirement, two conditions must be met: a guaranteed minimum weekly salary paid without regard to hours worked and a “reasonable relationship” between the pay and the amount of work anticipated. A day rate, the panel concluded, failed to satisfy these conditions.
On rehearing, the panel decision was affirmed but the decision was not unanimous. Notably and in a bit of an unusual twist, the second panel decision included a very pointed and sometimes personal and heated exchange between two of the panel judges. The Fifth Circuit granted rehearing en banc in March 2021. During argument earlier this week, counsel for Hewitt argued that any decision other than affirming the panel decisions would create a split in the circuits and radically upend the FLSA regulatory scheme. Counsel for Helix countered again that Helix complied with all applicable law by paying a day rate that exceeded the statutory requirements.
The Independent Petroleum Association of America has also entered the dispute filing an amicus brief in April. The Association, which represents more than 5,000 oil and natural gas companies, argued that allowing highly compensated, day rate employees like Hewitt to receive overtime would require the industry to “redefine its economic model and incur additional costs.”
This is a case with substantial implications for the oil and gas industry and may ultimately require companies to rethink how certain segments of their workforce are paid. We will keep you advised with any new developments to report.