Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Welcome
Go
Free Newsletter Sign Up

Justices to Review Oil Worker’s Six-Figure Pay Plus Overtime (1)

May 2, 2022, 1:34 PMUpdated: May 2, 2022, 4:23 PM

The U.S. Supreme Court will consider whether a Helix Energy Solutions tool pusher is eligible for overtime pay under federal law, despite making more than $200,000 a year, setting up a clash that will have ripple effects in the energy sector and its unique compensation structures.

The justices agreed Monday to review whether Michael Hewitt was exempt from the Fair Labor Standards Act’s overtime requirements because he was a “highly compensated executive employee.” Hewitt made double the $100,000 a year threshold that applied at the time for the overtime carve-out.

A full U.S. Court of Appeals for the Fifth Circuit, based in New Orleans, said in a 12-5 decision last September that Helix should comply with the FLSA’s overtime rule. Earning a certain income is insufficient on its own to avoid those protections, the majority said.

The energy sector decried the decision and said paying overtime to highly compensated workers would harm the energy industry, which calculates pay by day rates. Several states and oil and gas trade groups urged the Supreme Court to take up the case.

Those oil and gas producers, in particular, use day rates to compensate the workforce, including highly paid employees on oil-field or offshore jobs. Oil-field consultants like Hewitt, who can make as much as $1,000 a day, should clearly fall under the “highly compensated employee” exemption, the oil and gas associations argued.

“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,” the Texas Oil & Gas Association said in its high court brief. The Fifth Circuit’s decision “destabilizes the financial foundation underpinning exploration and production in the most oil and natural gas-rich regions across the United States,” the group said in its January filing.

Forcing companies to pay overtime to these highly paid individuals would impact the U.S. economy, considering the country’s use of oil and gas and the amount of jobs in midstream and downstream sectors, they said.

Welling Up Elsewhere

Helix’s attorneys told the justices the ruling created a deep split among the nation’s regional federal appellate courts.. The Cincinnati-based Sixth and St. Louis-based Eighth circuits have said daily-rate employees shouldn’t be exempt from overtime rules, regardless of how much they make. The Boston-based First Circuit, however, allowed an exemption for those workers under a salary-basis test, as did the New York-based Second Circuit.

Meanwhile, similar cases are bubbling in Colorado, New Mexico, and Pennsylvania, as well as the Gulf Coast area where offshore drilling is concentrated. Attorneys general from Mississippi, Alabama, Louisiana, Montana, Utah, and West Virginia told the high court that the Fifth Circuit’s ruling “delivers baseless windfalls to already-well-compensated executives.”

Hewitt’s attorney, Ed Sullivan of Oberti Sullivan LLP in Houston, has said that the issue isn’t as controversial as the oil and gas industry and Helix argue. He said the case was being used as a way to avoid Congress, which makes overtime rules clear under the FLSA.

“Helix violated eight decades of established law when it decided not to pay Mr. Hewitt overtime,” Sullivan told Bloomberg Law Monday. “My hope is that the Supreme Court will reject the invitation to write legislation and ultimately advise the company to seek assistance from its member of Congress if it wants a different result.”

Helix’s attorneys didn’t immediately respond to request for comment. The company is represented by Kirkland & Ellis LLP.

The case is Hewitt v. Helix Energy Sols. Grp., U.S., No. 21-984, cert. granted 5/2/22.

(Updated with additional reporting throughout.)

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

To read more articles log in.

Learn more about a Bloomberg Law subscription