Employee’s Daily Hitch Rate Requires Overtime Pay

By Roger S. Achille June 30, 2020
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oil rig out in the water

​An oil employee who was paid a daily hitch rate while working on a rig was not paid on a "salary basis" as defined by the Fair Labor Standards Act (FLSA) and as such should have been eligible for overtime pay, ruled the 5th U.S. Circuit Court of Appeals.

The plaintiff was an employee of Helix Energy Solutions Group Inc. for more than two years, working as a tool pusher. As a tool pusher, the plaintiff managed other employees while on a "hitch"—that is, while working offshore on an oil rig. Each hitch lasted about a month. Helix paid the plaintiff biweekly a set amount for each day that he worked.

The plaintiff worked more than 40 hours a week, so under the FLSA he would be entitled to overtime, unless he was an exempt employee.

Helix argued that the plaintiff was either an exempt executive or highly compensated employee. Both of those exemptions require the employer to meet a duties test and a salary test.

The salary test, in turn, has two components—first, the employer must pay the employee a minimum per-week rate, and second, the employer must pay the employee on a salary basis. The plaintiff contended that Helix did not pay him on a salary basis because it calculated his pay based on a daily, rather than weekly, rate.

Helix responded that since the plaintiff's daily rate was greater than the weekly salary requirement under federal regulations, so long as the plaintiff worked at least a single day during any particular week, he would receive more than the weekly salary requirement, and was therefore paid on a salary basis.

[SHRM members-only toolkit: Complying with U.S. Wage and Hour Laws and Wage Payment Laws]

The FLSA requires that an employee receive for each pay period a predetermined amount calculated on a "weekly or less frequent" pay period. In other words, the salary-basis test requires that an employee know in advance the amount of his or her compensation for each weekly—or less frequent—pay period, the appeals court said.

The 5th Circuit noted that although the plaintiff was paid biweekly, he did not receive a constant fraction of his annual compensation for each biweekly pay period. Rather, the court observed, the plaintiff had to take the number of days he worked and multiply by the operative daily rate to determine how much he earned.

Because the plaintiff knew his pay only after he worked through the pay period, the 5th Circuit explained that he did not receive a predetermined amount on a weekly or less frequent basis—rather, he received an amount contingent on the number of days he worked each week. Consequently, the court concluded that the plaintiff was not paid on a salary basis under federal regulations and was eligible for overtime pay.

Hewitt v. Helix Energy Solutions Group Inc., 5th Cir., No. 19-20023 (April 20, 2020).

Professional Pointer: Proper pay procedures require that an exempt employee's pay not be reduced in any workweek in which the employee performs any work because of variations in the quality or quantity of the work, and regardless of the number of days or hours worked.

Roger S. Achille is an attorney and a professor at Johnson & Wales University in Providence, R.I.

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