In April 2020, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit held that paying an employee a set amount for each day that he works (i.e., on a “day rate” basis) does not satisfy the “salary basis” component required to qualify as overtime-exempt under the Fair Labor Standards Act (FLSA), regardless of whether the employee earns the weekly minimum salary (currently, $684) required for the exemption. The full Fifth Circuit subsequently heard the case and, in a 12-6 opinion, reached the same conclusion. Hewitt v. Helix Energy Sols. Group, Inc., 15 F.4th 289 (5th Cir. 2021), cert. granted, No. 21-984 (U.S. May 2, 2022). The Sixth and Eighth Circuit Courts of Appeal previously had arrived at the same conclusion in FLSA collective actions. The U.S. Supreme Court has now granted certiorari and, presumably during next Fall’s term, will determine whether the analysis of the Fifth, Sixth, and Eighth Circuits regarding the FLSA’s salary-basis requirement was sound.
“Day rate” pay cases are often brought as collective actions, heightening the risk of considerable liability for employers. Moreover, “day rate” pay is a longstanding common practice in the energy industry. Therefore, the Supreme Court’s decision on this issue is particularly important.