Fifth Circuit issues devastating defeat for oil and gas companies in hour and wage dispute

Energy companies that compensate employees by the day – be it $200 or $1,000 – must still pay those people overtime because they are not considered exempted salaried personnel under the strict wording of the Fair Labor Standards Act, the 5th U.S. Court of Appeals ruled late Thursday.

The federal appeals court ruling, which was 12 to 6, is a blow to energy companies that have relied for decades on the idea that they could escape paying overtime to certain higher-level workers by paying them an extra-high daily wage.

Six judges dissented, stating that the majority decision overturns decades of standard practices within the energy sector and will have a devastating impact on the oil and gas industry. President Franklin D. Roosevelt and other original supporters of the Fair Labor Standards Act, the dissenters wrote, “are turning over in their respective graves in reaction to the en banc majority’s [decision].”

But Judge James Ho, who wrote the majority opinion, said none of that matters when it comes to deciding case law.

“Our job is to follow the text — not to bend the text to avoid perceived negative consequences for the business community,” Judge Ho wrote in his 17-page decision. “That is not because industry concerns are unimportant. It is because those concerns belong in the political branches, not the courts.”

Houston lawyer Ed Sullivan, who represents the plaintiff, Michael Hewitt, in the litigation, said Helix Energy needs to pay his client the overtime it owes him with interest, which he estimates is in the six figures.

“Despite what the energy industry argued, this is not a controversial issue to anyone who litigates FLSA (Fair Labor Standards Act) cases,” Sullivan said. “Almost every disinterested labor and employment lawyer knows that an employee who is paid purely by the day is not paid a salary under the FLSA. Helix rolled the dice in hopes that the 5th Circuit would substitute its subjective policy preferences in favor of settled law. “

Norton Rose Fulbright partner Carter Crow, who represents Houston-based Helix, declined to comment on the decision.

In the case, Hewitt v. Helix Energy Solutions Group, Hewitt tool pusher Hewitt sued his employer in 2017 for overtime he worked offshore on an oil rig.

Helix Energy lawyers argued that Hewitt, who oversaw the drill and deck crews and the subsea department, was not an hourly laborer under FLSA because he was considered exempt by being “highly compensated.”

Helix paid Hewitt a day rate of at least $963 for every day that he worked, regardless of the number of hours worked in a given day. His earnings totaled more than $200,000 in 2016.

The federal court in Houston rejected Hewitt’s lawsuit. Hewitt appealed to the 5th Circuit.

In writing for the majority, Ho wrote that Helix admits Hewitt’s compensation is “computed on a daily basis, rather than on a weekly, monthly, or annual basis.”

In arguments, Helix lawyers pointed out that Hewitt’s compensation was “a far cry from the wage practices against which the FLSA was created to protect.”

A majority of the appellate judges were unmoved.

“But it should go without saying that we are governed by the text of the FLSA and its implementing regulations, not some unenumerated purpose,” Ho wrote. “And Congress has never amended the text of the FLSA to categorically exempt highly paid employees from overtime — to the contrary, as previously noted, it has repeatedly rejected efforts to do so.”

The Independent Petroleum Association of America and the Texas Oil and Gas Association told the judges that a ruling against Helix could have “devastating effect” on energy companies and that these kind of overtime disputes should be rejected because they are “mathematically illogical.”

The two energy industry trade groups propose a formula that should decide whether an employee meets certain income thresholds to be paid overtime.

Ho did not think much of the idea.

“I’ve heard of using dictionaries to discern the plain meaning of legal texts,” the judge wrote. “I’ve never heard of using a calculator.”

In dissent, Judge Jacques Wiener said a more “common sense and a reasonable reading of the law” should lead to a win for Helix Energy. The judge wrote that Hewitt was among supervisors, who “from the outset have been excluded from overtime.” As a “tool pusher,” Hewitt actually pushed no tools.

“Hewitt never got his hands dirty — only the 12 or 13 roughnecks whom he supervised dirtied theirs,” Judge Winer wrote. “I imagine that the original proponents of the FLSA — including President Franklin D. Roosevelt, during whose term the FLSA and other ‘Great Depression’ measures were enacted — are turning over in their respective graves in reaction to the en banc majority’s interpretation of the regulatory text to undermine how the FLSA is supposed to operate.”


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