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Employment Alert! Today's SCOTUS Decision on Overtime Pay Impacts the Energy Industry

February 22, 2023

A United States Supreme Court ruling today could have a major impact on the oil and gas industry in the way it recruits, staffs, and compensates employees who work on offshore oil rigs and at remote oil and gas work sites. In the 6-3 decision, the Supreme Court found that a Houston-based energy company, Helix Energy Solutions Group Inc., must pay overtime compensation to a former employee who earned well over $200,000 per year, whom the company argued met the “highly compensated” exemption from federal overtime pay requirements.

The employee was a “toolpusher” on an offshore oil rig. He supervised up to 12 people, performed administrative tasks, and was second-in-command on the entire offshore rig during his 28 day “hitches” on the platform. Helix paid the toolpusher bi-weekly, but his pay was based upon a day rate of at least $963. After the toolpusher’s employment was terminated for performance issues, he filed a putative collective action in federal court seeking retroactive overtime pay on behalf of himself and other similarly situated current and former employees. 

The complaint alleged the former employee could not be deemed exempt from (i.e., ineligible for) overtime pay because his pay was “computed” on a daily basis and not a “salary basis.” Helix, in turn, argued that the former employee was “employed in a bona fide executive, administrative, or professional capacity” and was exempt as a “highly compensated employee” under the Fair Labor Standards Act because his day rate of pay at least $963 - exceeded the minimum weekly amount needed to qualify as a salaried employee. At the time, the “highly compensated” exemption required an employee earn at least $100,000 annually and have a minimum pay threshold of at least $684 per week (please note that the highly compensated minimum annual threshold is currently $107,432, while the minimum weekly amount is unchanged). The Houston-based federal district court agreed with Helix but was overturned by a full Fifth Circuit Court of Appeals. Helix appealed to the U.S. Supreme Court. 

In today’s opinion, the Supreme Court held that regardless of the amount paid, the salary basis requirement of the federal exemptions was not met because Helix paid the former toolpusher by the day, and did not provide a weekly guarantee. A weekly guarantee would have allowed Helix to characterize the former employee’s pay as salary-based. 

THE IMPACT:        

Employers that pay employees who appear to meet the administrative, executive, or professional exemptions on a day-rate basis, at a rate that exceeds the $100,000 annual and $684 weekly minimum thresholds, need to move quickly to shore-up their exposure.

WHAT TO DO:       

Companies with employees who fall into the same pay scenario as the former Helix employee have three options: 

1.    Pay those employees overtime; 
2.    Add a weekly guarantee to the day rate that fits the federal regulation; or
3.    Convert those employees to a straight salary for the weeks they work. 

Today’s decision underscores the importance for employers to secure arbitration agreements with employees that waives an employee’s right to file or participate in class and collective actions, which the U.S. Supreme Court upheld in the 2018 Epic Systems decision. Without this waiver, employers with a large number of current or former employees who fall into the above-scenario now face greater financial exposure if and when someone files a collective or class action case. 
 
Please do not hesitate to contact your Hall Estill attorney or a member of the Hall Estill Labor and Employment Team if you have any questions.