Supreme Court Holds Oil Rig Supervisor Paid $200K Owed Overtime

WASHINGTON — An oil rig supervisor who earned as much as $248,000 a year working for Houston, Texas-based Helix Energy Solutions Group was entitled to additional overtime pay after his dismissal, the U.S. Supreme Court ruled last week.

The case, Helix Energy Solutions Group v. Hewitt, is seen as having significant and potentially costly implications for the oil and gas industry.

Michael Hewitt worked from 2015 to 2017 as a supervisor of Helix’s offshore oil and gas operations, earning over $200,000 annually for supervising 12-14 men.

Officially, Hewitt was a “toolpusher,” with largely administrative duties that included ensuring the oil rig had sufficient materials, spare parts and skilled personnel to operate efficiently.

Consistent with industry practices, Hewitt worked 28-hitches, living on the rig for 28 days at a time and being on-duty for 12 hours each day. For this he was paid at a rate that ranged from $963 to $1,341 a day over the course of his employment.

In all, Hewitt earned $248,053 in 2015, $218,863 in 2016, and $143,680 ($215,520 annualized) for the eight months he worked in 2017. 

After Helix fired Hewitt, he filed a putative class action alleging the Fair Labor Standards Act entitled him and similarly situated employees to overtime.

Helix pushed back, arguing that while it is true “covered” employees must receive overtime when they work more than 40 hours a week, Hewitt was exempt from this requirement because he worked in a supervisory role and he was paid on a salary basis. 

To bolster its position, Helix noted that it never deducted any amount from Hewitt’s pay based on the quantity or quality of his work, and that he received at least $963, regardless of the hours he worked.

A district court judge who first heard the case agreed with Helix’s view, finding Hewitt was paid on a salary basis and thus was not due overtime pay.

But the 5th U.S. Circuit Court of Appeals reversed the decision, holding that Helix Energy’s compensation for Hewitt did not satisfy a provision of the FLSA that allowed so-called daily rate workers to be paid on a salary basis.

Helix appealed to the U.S. Supreme Court, which, in a 6-3 decision, upheld the 5th Circuit’s decision.

The majority’s position, as spelled out by Justice Elena Kagan, was that a regulation adopted in the 1940s was the deciding factor in the case. 

That regulation holds that highly compensated workers — now defined as those earning $107,000 a year or more — would not be eligible for overtime pay if they a) performed supervisory duties, and b) were paid at least $455 per week in salary.

“The question here is whether a high-earning employee is compensated on a ‘salary basis’ when his paycheck is based solely on a daily rate — so that he receives a certain amount if he works one day in a week, twice as much for two days, three times as much for three, and so on,” wrote Kagan.

“We hold that such an employee is not paid on a salary basis, and thus is entitled to overtime pay,” Kagan wrote.

Among those who disagreed was Justice Brett Kavanaugh, who, in a dissent joined by fellow conservative Justice Samuel Alito, wrote that because Hewitt earned a set daily rate, he knew he would be paid at least that much for any week in which he worked. 

That coupled with his supervisory duties made him exempt from overtime pay, Kavanaugh said.

Conservative Justice Neil Gorsuch in a very brief, separate dissent said he would dismiss the case as having been “improvidently granted” by the Supreme Court.

A number of oil and gas trade groups filed briefs backing Helix’s position.

Among these were the American Petroleum Institute and the Texas Oil and Gas Association, which argued in a joint brief that the pay practice Helix had employed to compensate Hewitt “has been relied upon and survived for decades without censure.”

They went on to assert, “The high-compensation guarantees commanded by oilfield consultants are the product of the significant bargaining power these highly skilled, scarce consultants leverage with oil and natural gas companies, and are, in fact, a type of compensation method the Department of Labor contemplated when drafting the Highly Compensated Employee exception.

“These guarantees further reflect the historic economic balance the industry must maintain given the particularly unpredictable nature of oil patch work. Against this backdrop, the 5th Circuit’s majority opinion departs from all of the circuit courts that have ruled on these legal issues. The opinion departs from the Fair Labor Standards Act text and intent, and destabilizes the financial foundation underpinning exploration and production in the most oil and natural gas-rich regions across the United States. 

“The opinion will impact states’ economies, as well as the U.S. economy, given the country’s use of oil and gas, the amount of jobs and dollars the midstream and downstream sectors represent,” the two organizations wrote. 

They went on to estimate that a $200,000 annual salary like Hewitt earned could result in as much as an additional $52,000 a year in back wages.

“Appending these types of costs to expensive exploration will drive up oil and gas production costs, slow down production, and threaten consultant jobs nationwide, contrary to the FLSA’s intent,” they wrote.

Dan can be reached at [email protected] and @DanMcCue