FLSA Case on the Supreme Court Docket

The United States Supreme Court will be ruling on a Fair Labor Standards Act (FLSA) case concerning whether a highly compensated employee whose pay was determined on a daily basis is exempt from the FLSA. Through the end of July, close to 5,800 COVID related employment lawsuits have been filed. President Biden has nominated Jessica Looman, current acting Wage-Hour Administrator to be the next Wage-Hour Administrator.


Supreme Court to Review FLSA Case – The United States Supreme Court has agreed to review a Fair Labor Standards Act (FLSA) that raises the issue of whether a highly compensated employee whose pay is computed on a daily basis is exempt from the FLSA. This case, Helix Energy Solutions Group v. Michael Hewitt (Docket No. 21-984) is on appeal from the United States Court of Appeals for the Fifth Circuit which ruled for the employee since while earning a certain level of income is required, “but insufficient on its own to avoid the overtime protections of the FLSA.” The National Labor Relations Board reported that union election petitions during the first nine months of this fiscal year exceed the total number of petitions filed during the last fiscal year.


To be exempt under the FLSA, an employee has to be paid on a salary basis and perform certain duties to be considered an administrative, professional, or executive employee. According to the Fifth Circuit, this case concerned the salary basis test. The FLSA regulations define being paid on a salary basis to require that compensation be paid “on a weekly, or less frequent basis, “without regard to the number of days or hours worked.” The Fifth Circuit pointed out that “we do not ordinarily think of daily or hourly wage earners—whose pay is subject to the vicissitudes of business needs and market conditions—as salaried employees.” However, a worker paid on a daily basis can be exempt from overtime, without violating the salary basis requirement, according to the Fifth Circuit, only if two conditions set forth in the FLSA regulations (29 C.F.R. 541.605b) are met: “if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.” The Fifth Circuit believed that the company failed to satisfy the requirements resulting in the employee being entitled to overtime.


Michael Hewitt worked as a tool pusher and managed other employees while they were working offshore on an oil rig. His pay, which was $963 per day was computed on a daily basis.

The Fifth Circuit indicated that the company could have met the first prong of the test by guaranteeing him a salary of $4,000 per week based on his daily rate of $963. The Fifth Circuit found that the company paid Mr. Hewitt a daily rate of pay without offering the minimum weekly amount required under the regulations that should be paid “regardless of the number of hours, days or shifts worked.” Second, the employer did not establish that a reasonable relationship existed between the guaranteed amount and the amount actually earned. The Fifth Circuit explained that the two requirements set a floor for how much the employee can expect to earn regardless of the amount worked as well as a ceiling on how much the employee can expect to work for his regular paycheck.


The Fifth Circuit rejected the company’s argument that since Mr. Hewitt’s compensation exceeded $200,000 per year, he is not the type of worker the FLSA was passed to protect. The Fifth Circuit noted that it had to follow the FLSA text, and it was up to the Congress to amend the FLSA to achieve the outcome desired by the company in this case. There is a split among the judicial circuits on this issue resulting in the Supreme Court granting the petition for review. The Supreme Court has scheduled oral argument for October 12th.


Union Election Petitions Increase – The National Labor Relations Board (NLRB) announced that during the first nine months of Fiscal Year 2022 (October 1–June 30), union representation petitions filed at the NLRB have increased 58%—to 1,892 from 1,197 during the first three quarters of the previous fiscal year and exceed the total number of petitions filed during Fiscal Year 2021. A representation petition is filed by employees, unions, or employers with an NLRB Field Office seeking to have the NLRB conduct an election to determine if the employees want union representation. The NLRB also advised that unfair labor practices have increased by 16% to a total of 12,819. Any member of the public can file an unfair labor practice charge with an NLRB field office alleging violations by either employers or unions of the National Labor Relations Act.


The Bureau of Labor Statistics (BLS) reported that in 2021, 10.3% of workers in the United States were unionized as compared to 1983, the first year for which this data was collected by BLS when the rate was 20.1%. The public sector is more highly unionized at a rate of 33.9% as compared to the private sector rate of 6.1%.


COVID Employment Litigation Update – The Fisher Phillips law firm indicated that as of July 28th, 5,772 COVID employment litigation cases had been filed. Two-thirds of the cases have been filed in state courts and one-third in federal court. Healthcare is the industry that has seen the most cases filed with almost 20% of the total followed by retail (11%), manufacturing (8.5%), government (7%), and hospitality (7%). Employment discrimination is the most common case type followed by remote work/leave conflicts, retaliation/whistleblower, vaccine requirements, and wage/hour. Of the cases filed, 52% have been closed with 63% being reported as settled.


Wage Hour Administrator Nominated – President Biden nominated Jessica Looman, current Acting Wage Hour Administrator in the Department of Labor to be the next Wage Hour Administrator. Looman has served since the beginning of the administration as the principal deputy administrator before becoming the acting administrator. Prior to joining the administration, she was the executive director of the Minnesota State Building and Construction Trades Council. She also worked for eight years with the Minnesota state government. Her nomination, which needs Senate approval will be considered first by the Senate Committee on Health, Education, Labor, and Pensions. She is the second nominee for this position. President Biden initially nominated David Weil, but he failed to gain Senate approval.


Neil Reichenberg is the former executive director of the International Public Management Association for Human Resources. He is an attorney, a frequent writer and speaker on public policy and human resource issues, and an adjunct faculty member at George Mason University. For questions or additional information, contact Reichenberg at neilreichenberg@yahoo.com.