The issue of the salary test for FLSA exemptions has been explored and analyzed through numerous cases. It is counterintuitive to think that an employee very highly paid for doing managerial, supervisory work could be non-exempt but under Part 541 of the FLSA regulations, part of the person’s compensation must be a “salary.” Now, an energy company is petitioning the U.S. Supreme Court to reverse a Fifth Circuit ruling that held that such a highly paid worker is non-exempt and owed overtime. The case is entitled Helix Energy Solutions Group Inc. et al. v. Michael J. Hewitt and is on appeal to the US Supreme Court from the Fifth Circuit Court of Appeals.
The Company is asserting that the rig worker, who earned a salary in excess of $100,000, is exempt and a lower court decision must be reversed. The Company claims that this decision conflicts with the FLSA itself, the decisions of other Circuits and Supreme Court precedent that calls for a “fair” interpretation of the white-collar exemption regulations. The Company’s petition notes that “the FLSA was enacted to protect low-wage, blue-collar laborers from workplace exploitation, not to give supervisors making six figures unanticipated windfalls based on the details of whether their handsome pay is calculated daily or weekly or based on small or large bonuses.”
The en banc Fifth Circuit held in a 12-6 decision that the worker was non-exempt because he was paid a day rate. The Company argued that the worker met both the Highly Compensated Exemption (HCE) test as well as the salary test. Under the HCE, a worker must receive annual compensation of $100,000 (now $107,000) of which at least $455 per week (now $684) must be a salary and the person must perform “one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.”
The Company asserts the worker met both prongs of the exemption test. It contended that the employee was paid every two weeks, received the minimum salary of $455 per week and his compensation was fixed. The man earned $248,000 in 2015, more than $200,000 in 2016, and close to $150,000 for the eight months the man was employed in 2017. The Company notes that this decision conflicts with rulings from the Sixth and Eighth Circuits on this issue, where both Courts found the workers were exempt under the HCE. The Company also argued that the holding and rationale in Encino Motorcars LLC v. Navarro were applicable; in that decision, the Supreme Court urged a more flexible and fair approach, as opposed to a narrow and restrictive one, concerning the Part 541 exemptions.
The Takeaway
On this issue, the FLSA rules seem out of step with modern realities. The law was passed to help lower paid workers (primarily) receive overtime for their labor and was not intended to benefit highly paid workers, like those involved here. Under the HCE, as long as a portion of the total compensation is the appropriate salary level, the worker should be exempt. I don’t understand what the problem is. Maybe this conservative (i.e. business friendly) Supreme Court will resolve this dilemma.
To be continued…
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