March 9, 2021, was a busy day for the Fifth Circuit in the wage and hour arena when it issued two decisions that carry big implications for application of the Fair Labor Standards Act (FLSA), the federal law that requires minimum wage and overtime compensation for most employees.
1. Can a day rate meet the FLSA’s salary basis test? Maybe – wait and see.
Hewitt v. Helix Energy Solutions, Inc., No. 19-20023 (5th Cir. Mar. 9, 2021).
Hewitt has a tortured history. In August 2017, Hewitt sued for alleged unpaid overtime, seeking to represent a class of tool pushers who worked offshore oil rig hitches for Helix, an oil and gas services company. According to Hewitt, he was paid a day rate— a set amount for each day he worked, regardless of the number of hours worked—which he claimed violated the FLSA. To be exempt from the FLSA’s mandated overtime pay, an employee must be paid a salary (and perform certain duties). Helix argued Hewitt and others were paid a “salary” according to FLSA’s regulation (29 C.F.R. § 541.602) defining the term. Therefore, Helix argued workers like Hewitt were exempt from the FLSA and not entitled to overtime pay.
Then, enter the Fifth Circuit’s day rate decision in Faludi v. United States Shale Solutions, 936 F.3d 215 (5th Cir. 2019). Initially in Faludi, the Fifth Circuit decided a day rate could be a salary if the employee regularly received a predetermined weekly amount no matter how many days or hours he worked. Faludi asked the Fifth Circuit to rehear his case en banc (before all the judges on the Court of Appeals); and the Fifth Circuit withdrew its initial opinion, sidestepped the day rate issue, and decided the case on a different basis. Faludi v. United States Shale Solutions, 950 F.3d 269 (5th Cir. 2020). This left the issue of whether a day rate could qualify as a salary undecided.
In April 2020, Hewitt revisited the day rate issue that Faludi left up in the air. See 956 F.3d 341 (5th Cir. 2020). The Fifth Circuit decided a day rate is not a salary because an employee would only know his compensation after he worked through a pay period, as opposed to a salary where the employee knows how much he is guaranteed before working the pay period.
In December 2020, the Fifth Circuit changed its mind again. See 983 F.3d 789 (5th Cir. 2020). The Fifth Circuit posed the question, “Can a daily rate employee ever be regarded as being paid on a salary basis and therefore exempt from overtime pay under the FLSA?” The Court answered “yes,” if two conditions are met: (1) the employee is guaranteed at least $684 per week (the amount the FLSA requires to be exempt from overtime), no matter the number of hours or days worked; and (2) a reasonable relationship exists between the guaranteed amount and the actual amount earned in the workweek. The Court was clear if these two conditions are met, an employer can pay a day rate that qualifies as a salary. The Court, however, decided Helix’s pay practice did not meet these conditions. So, Helix asked the Fifth Circuit to rehear the issue en banc.
On March 9, 2021, the Court decided to re-hear Hewitt en banc, with oral argument tentatively the week of May 24, 2021. Considering the United States Supreme Court selects very few cases to hear, the Fifth Circuit’s en banc decision could settle the issue of whether a day rate can be a salary in its jurisdiction of Louisiana, Mississippi, and Texas. On the other hand, whichever way the decision goes, Hewitt could prompt the Supreme Court to look at the issue, especially because the Sixth and Eighth Circuit Courts of Appeals have also analyzed the FLSA regulation at issue, 29 C.F.R. § 541.602.[1]
2. Does the FLSA preempt “redundant” state law claims? Yes.
Aldridge v. Mississippi Dep’t of Corrections, No. 20-60311 (5th Cir. Mar. 9, 2021).
In a nutshell, preemption means a federal law displaces similar state laws. There are three types of federal preemption:
- express preemption, meaning a federal statute’s language expressly states it displaces state laws;
- field preemption, where a federal scheme is so comprehensive or federal interest so dominant federal law displaces state law in that field; and
- conflict preemption, where complying both the federal and the state law is impossible or state law stands in the way of accomplishing Congress’ goals for the federal law.
Nearly 900 (yes, hundred) plaintiffs in Aldridge alleged claims for FLSA overtime and recordkeeping, along with a litany of state law tort claims related to the same monies, e.g., civil conversion, conspiracy, emotional distress. The district court dismissed the state law tort claims as duplicative of their FLSA claims, as none of them could be separate or independent of the conduct allegedly violating the FLSA.
On appeal, the Fifth Circuit launched into a full-on preemption analysis. The Fifth Circuit eliminated express and conflict preemption right away: the FLSA’s text says nothing about preemption but does allow states to set higher minimum wage and overtime requirements. Left with conflict preemption, the Court examined the FLSA’s purposes of protecting workers from unfair hours and low pay and decided allowing state law tort claims would overlap and would therefore be an obstacle to accomplishing the FLSA’s objectives. The Court specifically held:
… this does not mean that employees may not sue under state law for unpaid minimum wages and overtime compensation when state law provides for that cause of action; it only means that they may not sue simultaneously under both state law and the FLSA for these violations if state law does not independently provide for such a cause of action.
***
We conclude that the FLSA preempts redundant state law claims for nonpayment of minimum wages and overtime compensation by way of conflict preemption.
In sum, an employee can sue under the FLSA or a state law wage and hour claim but cannot piggyback other state law claims onto an FLSA claim.
[1] As noted in Hewitt, 983 F.3d at 793 (citing Hughes v. Gulf Interstate Field Servs., Inc., 878 F.3d 183, 189 (6th Cir. 2017), Coates v. Dassault Falcon Jet Corp., 961 F.3d 1039, 1042 (8th Cir. 2020)).
