Helix Energy Solutions Group, Inc. v. Hewitt

Helix Energy Solutions Group, Inc. v. Michael J. Hewitt (2023)
Supreme Court of the United States
4159175Helix Energy Solutions Group, Inc. v. Michael J. Hewitt2023Supreme Court of the United States

Note: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

HELIX ENERGY SOLUTIONS GROUP, INC., ET AL. v. HEWITT
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 21–984. Argued October 12, 2022—Decided February 22, 2023

Respondent Michael Hewitt filed an action against his employer, petitioner Helix Energy Solutions Group, seeking overtime pay under the Fair Labor Standards Act of 1938, which guarantees overtime pay to covered employees when they work more than 40 hours a week. From 2014 to 2017, Hewitt worked for Helix on an offshore oil rig, typically working 84 hours a week while on the vessel. Helix paid Hewitt on a daily-rate basis, with no overtime compensation. So Hewitt’s paycheck, issued every two weeks, amounted to his daily rate times the number of days he had worked in the pay period. Under that compensation scheme, Hewitt earned over $200,000 annually. Helix asserts that Hewitt was exempt from the FLSA because he qualified as “a bona fide executive.” 29 U. S. C. §213(a)(1). Under applicable regulations, an employee is considered a bona fide executive excluded from the FLSA’s protections if the employee meets three distinct tests: (1) the “salary basis” test, which requires that an employee receive a predetermined and fixed salary that does not vary with the amount of time worked; (2) the “salary level” test, which requires that preset salary to exceed a specified amount; and (3) the job “duties” test. See 84 Fed. Reg. 51230. The Secretary of Labor has implemented the bona fide executive standard through two separate and slightly different rules, one “general rule” applying to employees making less than $100,000 in annual compensation, and a different rule addressing “highly compensated employees” (HCEs) who make at least $100,000 per year. 29 CFR §§541.100, 541.601(a), (b)(1). The general rule considers employees to be executives when they are “[c]ompensated on a salary basis” (salary-basis test); “at a rate of not less than $455 per week” (salary-level test); and carry out three listed responsibilities—managing the enterprise, directing other employees, and exercising power to hire and fire (duties test). §541.100(a). The HCE rule relaxes only the duties test, while restating the other two. As litigated in this case, whether Hewitt was an executive exempt from the FLSA’s overtime pay guarantee turns solely on whether Hewitt was paid on a salary basis. The District Court agreed with Helix’s view that Hewitt was compensated on a salary basis and granted the company summary judgment. The Court of Appeals for the Fifth Circuit reversed, deciding that Hewitt was not paid on a salary basis and therefore could claim the FLSA’s protections. The court so held based on its examination of the two regulations that give content to the salary-basis test. The majority first concluded that a daily-rate employee (like Hewitt) does not fall within the main salary-basis provision of §541.602(a), which states:

“An employee will be considered to be paid on a ‘salary basis’ … if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Subject to [certain exceptions], an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.”

Second, the court held that “daily-rate” workers can qualify as paid on a salary basis only through the “special rule” of §541.604(b), which focuses on workers whose compensation is “computed on an hourly, a daily or a shift basis.” Because Hewitt’s compensation concededly did not satisfy §604(b)’s conditions, the court concluded that Hewitt, although highly paid, was not exempt from the FLSA. Reaching the opposite conclusion, a dissenting opinion determined that Hewitt’s compensation satisfied the salary basis test of §602(a) and that §604(b) is not applicable to employees who fall within the HCE rule.

Held: Hewitt was not an executive exempt from the FLSA’s overtime pay guarantee; daily-rate workers, of whatever income level, qualify as paid on a salary basis only if the conditions set out in §541.604(b) are met. Pp. 7–20.

(a) The critical question here is whether Hewitt was paid on a salary basis under §602(a). A worker may be paid on a salary basis under either §602(a) or §604(b). But Helix acknowledges that Hewitt’s compensation did not satisfy §604(b)’s conditions. And the Court concludes that Helix did not pay Hewitt on a salary basis as defined in §602(a), a conclusion that follows from the text and the structure of the regulations. Pp. 7–17.

(1) The text of §602(a) excludes daily-rate workers. An employee, the regulation says, is paid on a salary basis only if he “receive[s] the full salary for any week in which [he] performs any work without regard to the number of days or hours worked.” Whenever an employee works at all in a week, he must get his “full salary for [that] week”—what §602(a)’s prior sentence calls the “predetermined amount.” That amount must be “without regard to the number of days or hours worked”—or as the prior sentence says, it is “not subject to reduction because” the employee worked less than the full week. Giving language its ordinary meaning, nothing in that description fits a daily-rate worker, who by definition is paid for each day he works and no others. Further, §602(a)’s demand that an employee receive a predetermined amount irrespective of days worked embodies the standard meaning of the word “salary.” The “concept of ‘salary’ ” is linked, “[a]s a matter of common parlance,” to “the stability and security of a regular weekly, monthly, or annual pay structure.” 15 F. 4th 289, 291. Helix responds by focusing on §602(a)’s use of the word “received,” contending that because Hewitt got his paycheck every two weeks, and that check contained pay exceeding $455 (the salary level) for any week in which he had worked, Hewitt was paid on a salary basis. But Helix offers no reason for hinging satisfaction of the salary-basis test on how often paychecks are distributed. And Helix’s interpretation of the “weekly basis” phrase is not the most natural one. A “basis” of payment typically refers to the unit or method for calculating pay, not the frequency of its distribution. And that is how neighboring regulations use the term. The “weekly basis” phrase thus works hand in hand with the rest of §602(a) to reflect the standard meaning of a “salary,” which connotes a steady and predictable stream of pay. Pp. 8–12.

(2) The broader regulatory structure—in particular, the role of §604(b)—confirms the Court’s reading of §602(a). Section §604(b) lays out a second path for a compensation scheme to meet the salary-basis requirement. And that path is all about daily, hourly, or shift rates. An employee’s earnings, §604(b) provides, “may be computed on” those shorter bases without “violating the salary basis requirement” so long as an employer “also” provides a guarantee of weekly payment approximating what the employee usually earns. Section 604(b) thus speaks directly to when daily and hourly rates are “[]consistent with the salary basis concept.” 69 Fed. Reg. 22184. Reading §602(a) also to cover daily- and hourly-rate employees would subvert §604(b)’s strict conditions on when their pay counts as a “salary.” By contrast, when read as limited to weekly-rate employees, §602(a) works in tandem with §604(b), with §604(b) taking over where §602(a) leaves off.

Helix’s argument to the contrary relies on the premise that the HCE rule operates independently of §604(b). Even if so, a daily-rate worker like Hewitt is not paid on a salary basis under the plain text of §602(a). And supposing that the HCE rule incorporates only §602(a), and not §604(b), those two provisions still must be read to complement each other because §602(a) cannot change meanings depending on whether it applies to the general rule or the HCE rule. Regardless, Helix is wrong that the HCE rule operates independently of §604(b). The HCE rule refers to the salary-basis (and salary-level) requirement in the same way that the general rule does. Compare §541.601(b)(1) (requiring “at least $455 per week paid on a salary or fee basis”) with §541.100(a)(1) (requiring payment “on a salary basis at a rate of not less than $455 per week”). And the two provisions giving content to that requirement—explaining when a person is indeed paid on a salary basis—are §602(a) and §604(b). So both those provisions apply to both the general and the HCE rule. There is a difference between the HCE and general rule; it just has nothing to do with the salary-basis requirement. That difference instead involves the duties standard, which is more flexible in the HCE rule. Pp. 13–17.

(b) The Court’s reading of the relevant regulations properly concludes this case. Helix urges the Court to consider supposed policy consequences of that reading, but even the most formidable policy arguments cannot overcome a clear textual directive. See BP p.l.c. v. Mayor and City Council of Baltimore, 593 U. S. ___, ___. And anyway, Helix’s appeal to consequences appears less than formidable in the context of the FLSA’s regulatory scheme. Helix’s complaint about “windfalls” for high earners fails, as the HCE rule itself reflects Congress’s choice not to set a simple income level as the test for exemption. As to Helix’s cost-based objections, the whole point of the salary-basis test is to preclude employers from paying workers neither a true salary nor overtime. So too, Helix’s complaints about retroactive liability lack force because the salary-basis test is not novel, but rather traces back to the FLSA’s beginnings. Pp. 17–20.

15 F. 4th 289, affirmed.

Kagan, J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Sotomayor, Barrett, and Jackson, JJ., joined. Gorsuch, J., filed a dissenting opinion. Kavanaugh, J., filed a dissenting opinion in which Alito, J., joined.

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).

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