The question of whether day rate workers are entitled to overtime has finally been answered in the affirmative by the U.S. Supreme Court. The Court recently handed down a decision that makes it clear that day rate workers are not exempt from overtime rules, even if they are highly compensated. This decision will have an immediate impact on day rate workers (commonly employed in energy, offshore drilling, industrial construction and healthcare), who often work far more than 40 hours per week and yet are denied overtime pay. These workers are now able to bring claims to recover up to double their unpaid back overtime.
Background of the Decision
Michael Hewitt was previously a “tool-pusher” for Helix Energy Solutions Group. Mr. Hewitt worked on an offshore oil rig, supervising drilling and overseeing well maintenance activities, among other tasks. He was paid a day rate of $963 regardless of the number of hours worked each day.
Quite often, however, Mr. Hewitt worked far more than 40 hours every week. In fact, it was not unusual for him to work over 80 hours a week. Typically, under the Fair Labor Standards Act (FLSA), an employee who works more than 40 hours in a workweek is entitled to overtime pay at 1.5 times the regular rate. Historically, however, day rate workers are paid the same regardless of the number of hours they work. This was the case for Mr. Hewitt. Although he earned more than $200,000 per year between 2014 and 2017, he was paid no overtime.
What the Court Decided
Business groups opposed Hewitt’s argument that he should be paid overtime under the FLSA. They pointed out that he was highly trained and generously paid for his work. Conversely, they contended, the FLSA was originally intended to protect low-wage workers from being taken advantage of by having to work excessive hours.
The Supreme Court did not agree. In a 6-3 decision, the Court decided that Mr. Hewitt was entitled to overtime pay under the FLSA because he had been paid on a daily basis and not on a “salary basis”. The provision in the law that exempts executive and administrative employees from overtime only applies if workers are paid a guaranteed “salary” of at least $684/week. Payment of a day rate, no matter how high, does not legally satisfy the “salary basis” requirement.
In the opinion written by Justice Elena Kagan, it was determined that the regulation in question “applies solely to employees paid by the week (or longer); it is not met when an employer pays an employee by the day….” More specifically, to qualify for an exemption under the FLSA, an employee must be paid at least $684 per week on a salary basis. Critically, Hewitt was paid as a day rate worker, not a salaried worker. So even though he earned substantially more than $684/week, he was entitled to overtime.
A History of Overtime Violations
Over the years, workers have filed hundreds of lawsuits against oil and gas companies alleging violations of overtime laws. These employers have consistently argued that FLSA exemptions (such as the highly compensated employee exemption) apply to workers in this industry, and therefore that they do not have to pay overtime. The argument is essentially that the day rate payments qualify as a “salary” under the regulations.
If this were true, most oil and gas workers who are paid a day rate would not be entitled to overtime. However, the decision in this case ultimately rejected the argument that day rate is equivalent to a salary. According to the Supreme Court, “The word ‘salary’ connotes a steady and predictable stream of pay…The whole point of the salary-basis test is to preclude employers from paying workers neither a true salary nor overtime.”
The Takeaway for Employees
In determining whether you are entitled to overtime, how you are paid could be more important than how much you are paid. Mr. Hewitt was paid far more than the $684 weekly rate required for an overtime exemption under the FLSA. But he was paid as a day rate worker, not as a salaried employee. His employer could therefore not rely on the exemptions that usually cover executive and highly compensated workers.
Are you a day rate worker who has not been paid overtime? Do you have concerns or questions about whether you have been paid fully and fairly for your work? The Lore Law Firm fights to recover unpaid overtime wages on behalf of workers in all 50 states and the District of Columbia, and we work on a contingent fee – so there are no fees unless we win. Strict time limits apply to the filing of unpaid overtime claims. Let us provide a fast, free and confidential review of your situation today.
