Hewitt v. Helix Engy Solutions Grp

Case: 19-20023 Document: 00516008345 Page: 1 Date Filed: 09/09/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
September 9, 2021
No. 19-20023
Lyle W. Cayce
Clerk
Michael J. Hewitt,
Plaintiff—Appellant,
versus
Helix Energy Solutions Group, Incorporated; Helix
Well Ops, Incorporated,
Defendants—Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:17-CV-2545
Before Owen, Chief Judge, and Jones, Smith, Wiener, Stewart,
Dennis, Elrod, Southwick, Haynes, Graves, Higginson,
Costa, Willett, Ho, Duncan, Engelhardt, Oldham, and
Wilson, Circuit Judges.
James C. Ho, Circuit Judge, joined by Smith, Stewart, Haynes,
Graves, Higginson, Costa, Willett, Duncan,
Engelhardt, Oldham, and Wilson, Circuit Judges:
The Fair Labor Standards Act (FLSA) establishes a standard 40-hour
workweek by requiring employers to pay “time and a half” for any additional
time worked. See 29 U.S.C. § 207(a).
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Congress has repeatedly rejected efforts to categorically exempt all
highly paid employees from overtime requirements. See, e.g., 84 Cong. Rec.
5458–59 (1939) (bill to exempt “employees employed at a guaranteed
monthly salary of $200 a month or more”); H.R. 8624, 76th Cong. (1940)
(bill to exempt all employees receiving a guaranteed monthly salary of $150
or more); 143 Cong. Rec. E317-04, E318, 1997 WL 79643, at *2 (Feb. 26,
1997) (proposing a bill to “create an income threshold that automatically
exempts from FLSA scrutiny the highest paid strata of the workforce”).
Accordingly, both the Secretary of Labor and the Supreme Court—as
well as our court—have observed that “employees are not to be deprived of
the benefits of the [FLSA] simply because they are well paid.” Jewell Ridge
Coal Corp. v. Local No. 6167, 325 U.S. 161, 167 (1945). See also Parrish v.
Premier Directional Drilling, 917 F.3d 369, 388 (5th Cir. 2019) (same); 69 Fed.
Reg. 22,122-01 (2004) (same).
Instead, Congress has authorized the Secretary to promulgate
regulations exempting “bona fide executive, administrative, [and]
professional” employees from overtime. 29 U.S.C. § 213(a)(1). Under that
authority, the Secretary has exempted “highly compensated” (29 C.F.R. §
541.601) as well as more modestly paid “executive,” “administrative,” and
“professional” employees (id. §§ 541.100, 541.200, 541.300).
To fall within any of these exemptions, however, three conditions
must be met: First, the employee must meet certain criteria concerning the
performance of executive, administrative, and professional duties. Second,
the employee must meet certain minimum income thresholds. Finally, the
employee must be paid on a “salary basis.” And although the duties criteria
and income thresholds vary from exemption to exemption, the regulations
apply the same salary-basis requirement to all four exemptions. See id. §
541.100(a)(1) (applying the salary-basis test to executive employees); id. §
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541.200(a)(1) (administrative employees); id. § 541.300(a)(1) (professional
employees); id. § 541.601(b)(1) (highly compensated employees).
So earning a certain level of income is necessary, but insufficient on
its own, to avoid the overtime protections of the FLSA. The employee must
also be paid on a salary basis, as well as perform certain duties. And unless
those tests are met, the employee is “not exempt . . . no matter how highly paid
they might be.” Id. § 541.601(d) (emphasis added) (specifying various
professions that are subject to overtime regardless of the amount of income
earned). 1
It is the salary-basis test that is sharply contested in this case. Helix
Energy Solutions Group claims that Michael Hewitt is exempt from overtime
as a highly compensated executive employee under § 541.601. The parties
agree that Hewitt meets both the duties requirements and income thresholds
of both exemptions.
The company admits, however, that Hewitt’s pay is “computed on a
daily basis,” rather than on a weekly, monthly, or annual basis.
As a matter of common parlance, we typically associate the concept of
“salary” with the stability and security of a regular weekly, monthly, or
annual pay structure. By contrast, we do not ordinarily think of daily or
1
The lead dissent opens by emphasizing the “uncomfortable” fact that Hewitt is
highly paid. But then it concedes in footnote 6 that the regulations expressly contemplate
the potential for overtime “no matter how highly paid” the employee. 29 C.F.R. §
541.601(d). Moreover, the dissent does not deny that all three branches of government—
Congress, the Labor Department, and the Supreme Court—agree with that conclusion.
Nor should this consensus surprise anyone—to the contrary, we all agree that an employee
who satisfies the income and duties requirements must also comply with (and thus
potentially fail under) the salary-basis test.
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hourly wage earners—whose pay is subject to the vicissitudes of business
needs and market conditions—as “salaried” employees.
FLSA regulations reflect this dichotomy—defining salary as
compensation paid “on a weekly, or less frequent basis,” “without regard to
the number of days or hours worked.” Id. § 541.602(a) & (a)(1).
That is not to say that an hourly or daily rate can never meet the salary-
basis test. But the Secretary has promulgated a special rule that must be
satisfied before an hourly or daily rate will be regarded as a “salary.”
That regulation is found in 29 C.F.R. § 541.604(b). And it explicitly
states that an employee whose pay is “computed on a daily basis” must meet
certain criteria to satisfy the salary-basis test:
An exempt employee’s earnings may be computed on an hourly,
a daily or a shift basis, without losing the exemption or violating the
salary basis requirement, 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.
Id. § 541.604(b) (emphases added). So a daily-rate worker can be exempt
from overtime—but only “if” two conditions are met: the minimum weekly
guarantee condition and the reasonable relationship condition.
Helix does not even purport to meet these conditions. Instead, Helix
asks us to ignore them altogether.
But respect for text forbids us from ignoring text. As a matter of plain
text, we hold that, when it comes to daily-rate employees like Hewitt, Helix
must comply with § 541.604(b).
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The same textual approach has been taken by both the Sixth and
Eighth Circuits as well as the Labor Department—regardless of how much
the employee is compensated. 2 Likewise, the overwhelming majority of
federal district courts to have addressed the issue have made clear that §
541.604(b) applies to daily-rate employees throughout the energy industry,
regardless of the amount of their pay.
Helix could have easily complied with § 541.604(b)—for example, by
offering a minimum weekly guarantee of $4,000 based on Hewitt’s daily rate
of $963. See, e.g., Hewitt v. Helix Energy Sols. Grp., 983 F.3d 789, 801 (5th
Cir. 2020) (Ho, J., concurring), vacated on petition for rehearing en banc, 989
F.3d 418 (5th Cir. 2020). It has not done so. Under the plain text of §
541.604(b), that is all that matters.
We reverse and remand for further proceedings.
2
For example, the Sixth Circuit agrees that “[t]he text of § 541.602(a) does not
tell us what to do when an employee’s salary is not clearly calculated ‘on a weekly, or less
frequent basis.’” Hughes v. Gulf Interstate Field Servs. Inc., 878 F.3d 183, 189 (6th Cir.
2017). Moreover, it specifically rejects the notion floated by the lead dissent here—namely,
that in cases involving highly compensated employees, “we should pay no attention to §
541.604(b),” but should instead follow Litz v. Saint Consulting Group, Inc., 772 F.3d 1 (1st
Cir. 2014), and Anani v. CVS RX Services, Inc., 730 F.3d 146 (2nd Cir. 2013). Id. As the
Sixth Circuit notes, “what [the dissent here] misunderstands about [Litz and Anani] is that
the situations in which those authorities ignore § 541.604(b) are situations in which . . .
plaintiffs . . . were undisputedly guaranteed weekly base salaries”—unlike day rate workers
like Hewitt. Id. at 189–90 (emphasis added). Likewise, the Eighth Circuit agrees that the
“general” salary-basis rule set forth in § 541.602(a) is “subject to numerous interpretive
rules”—including, most prominently, § 541.604(b). Coates v. Dassault Falcon Jet Corp.,
961 F.3d 1039, 1042 (8th Cir. 2020). And the Labor Department agrees that, absent some
special rule, daily rate workers “would not qualify as highly compensated employees”
because “their day rate does not constitute payment on a salary basis.” U.S. Dep’t of
Labor, Wage & Hour Div., Opinion Letter FLSA2020-13, 2020 WL 5367070, *1 (Aug. 31,
2020).
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I.
Hewitt worked as a tool pusher for Helix for over two years. In that
position, Hewitt managed other employees while on a “hitch”—that is,
while working offshore on an oil rig. Each hitch lasted about a month.
Helix concedes that it paid Hewitt based solely on a daily rate. Helix
also concedes that it required Hewitt to work well over forty hours per week.
The company nevertheless attempts to avoid the FLSA overtime
penalty by characterizing Hewitt as a highly compensated executive
employee. See 29 C.F.R. § 541.601.
To prevail, however, Helix must show that it paid Hewitt on a “salary
basis” as defined by the regulations. Id. §§ 541.600(a), .601(b)(1).
(Alternatively, Helix could have attempted to invoke the highly compensated
employee exemption by showing that it paid Hewitt on a “fee basis,” see id.
§§ 541.601(b)(1), .605—but it has made no such argument in this appeal.)
Hewitt contends that Helix did not pay him on a “salary basis”
because the company calculated his pay using a daily rate without satisfying
the requirements of § 541.604(b). Helix responds that it was not required to
comply with § 541.604(b).
The district court agreed with Helix and granted the company
summary judgment. Hewitt v. Helix Energy Sols. Grp., 2018 WL 6725267, at
*3–*4 (S.D. Tex.). This appeal followed. We review the district court’s
interpretation of the applicable Labor Department regulations de novo. See
Davis v. Signal Int’l Texas GP, L.L.C., 728 F.3d 482, 488 (5th Cir. 2013).
II.
This appeal requires us to do nothing more than apply the plain text
of the regulations. Under 29 C.F.R. § 541.601, a highly compensated
employee must be paid on a “salary basis” in order to avoid overtime. Under
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§ 541.604(b), an employee whose pay is “computed on a daily basis” must
meet certain conditions in order to satisfy the salary-basis test. And Helix
admits that Hewitt’s pay is “computed on a daily basis.” Accordingly,
Hewitt is subject to overtime unless his pay complies with § 541.604(b). If
we are following the plain text of the regulations, that should be the end of
the story.
A.
There are multiple components to the salary-basis test, as articulated
in various Labor Department regulations. There is the “[g]eneral rule,” 29
C.F.R. § 541.602(a)—and then there are various exceptions and provisos to
that general rule. To properly understand and apply the salary-basis test, we
must examine not only the general rule, but also any exceptions or provisos
that bear upon a particular fact pattern—such as the daily rate presented in
this appeal. Viewing the regulations as a whole, we conclude that Helix has
failed to demonstrate that Hewitt is exempt from overtime.
The “[g]eneral rule” begins as follows: “An employee will be
considered to be paid on a ‘salary basis’ within the meaning of this part if the
employee regularly receives each pay period on a weekly, or less frequent basis,
a predetermined amount constituting all or part of the employee’s
compensation.” Id. § 541.602(a) (emphasis added). The rule further
provides that “an exempt employee must receive the full salary for any week
in which the employee performs any work without regard to the number of days
or hours worked.” Id. § 541.602(a)(1) (emphasis added).
Of course, some employers may prefer to pay certain workers on a
daily or hourly rate—rather than on a “weekly, or less frequent basis,”
“without regard to the number of days or hours worked.” The Secretary has
accommodated this practice by promulgating a special rule dictating what
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conditions must be satisfied before an hourly or daily rate will be regarded as
a “salary”:
An exempt employee’s earnings may be computed on an hourly,
a daily or a shift basis, without losing the exemption or violating the
salary basis requirement, 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.
Id. § 541.604(b) (emphasis added).
Under this rule, an employee’s earnings can “be computed on . . . a
daily . . . basis, without losing the exemption or violating the salary basis
requirement”—but only “if” certain other conditions are met. That is, an
employer can pay a daily rate under § 541.604(b) and still satisfy the salary-
basis test of § 541.602—but only “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.” Id.
This two-prong test protects employees in two ways. First, the
“minimum weekly” guarantee ensures that a daily-rate employee still
receives a guaranteed amount each week “regardless of the number of hours,
days or shifts worked.” Id. In other words, it sets a floor for how much the
employee can expect to earn, “regardless” of how many hours, days, or shifts
the employee works. Id. Second, the reasonable-relationship test ensures
that the minimum weekly guarantee is not a charade—it sets a ceiling on how
much the employee can expect to work in exchange for his normal paycheck,
by preventing the employer from purporting to pay a stable weekly amount
without regard to hours worked, while in reality routinely overworking the
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employee far in excess of the time the weekly guarantee contemplates. And
as the Labor Department has explained, without the reasonable-relationship
test, “employees could routinely receive weekly pay of $1,500 or more and
yet be guaranteed only the minimum required $455 (thus effectively allowing
the employer to dock the employee for partial day absences).” 69 Fed. Reg.
22,184. But “[s]uch a pay system would be inconsistent with the salary basis
concept and the salary guarantee would be nothing more than an illusion.” Id.
(emphasis added). See also Brock v. Claridge Hotel & Casino, 846 F.2d 180,
185 (3rd Cir. 1988) (explaining that an employee is not paid on a “salary
basis” if “the employee’s usual weekly income” calculated on an hourly
basis “far exceeds the ‘salary’ guarantee” the employer provided).
Helix does not comply with either prong of § 541.604(b). First, it pays
Hewitt a daily rate without offering a minimum weekly required amount paid
“regardless of the number of hours, days or shifts worked.” 29 C.F.R.
§ 541.604(b). Helix theorizes that Hewitt’s daily rate is the minimum weekly
guaranteed amount. But a daily rate, by definition, is paid with regard to—
and not “regardless of”—“the number of . . . days . . . worked.” Id. Second,
Helix does not comply with the reasonable-relationship test. Helix pays
Hewitt orders of magnitude greater than the minimum weekly guaranteed
amount theorized by Helix (Hewitt’s daily rate). Tellingly, Helix does not
contend that it satisfies the reasonable-relationship test.
B.
The plain text of the regulations is decisive of this appeal. But it is
worth noting that this textualist approach is also shared by the Sixth and
Eighth Circuits and the Secretary of Labor—not to mention the
overwhelming majority of district courts that have confronted these issues
across the energy industry.
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For example, in Hughes v. Gulf Interstate Field Servs. Inc., 878 F.3d 183(6th Cir. 2017), the plaintiffs admitted that they satisfied both the duties and
income thresholds for highly compensated employees. See Hughes v. Gulf
Interstate Field Servs., Inc., 2016 WL 4197596, at *3 (S.D. Ohio), modified on
clarification, 2016 WL 10592321 (S.D. Ohio), and rev’d and remanded on other
grounds, 878 F.3d 183 (6th Cir. 2017) (“Plaintiffs do not contest that the other
requisites for the highly compensat[ed] [employee] exemption are
satisfied.”). The issue was whether their pay also “satisfied the salary-basis
test contained within 29 C.F.R. § 541.602(a).” Id.
The Sixth Circuit concluded that “[t]he text of § 541.602(a) does not
tell us what to do when an employee’s salary is not clearly calculated ‘on a
weekly, or less frequent basis.’” 878 F.3d at 189. Moreover, it explicitly
rejected the notion (floated by the employer there, and the dissenters here)
that “we should pay no attention to § 541.604(b)” in cases involving highly
compensated employees. Id.
Likewise, the Eighth Circuit has concluded that the “general
definition” of salary basis as set forth in § 541.602(a) is “subject to numerous
interpretive rules,” including § 541.604(b). Coates v. Dassault Falcon Jet
Corp., 961 F.3d 1039, 1042 (8th Cir. 2020) (quoting § 541.604(b)). See also
id. at 1048 (relying on Hughes and § 541.604(b)).
Our reading finds further support in a Labor Department opinion
issued just last year by the Administrator of the Wage and Hour Division.
That opinion concluded that, absent some special rule, daily rate workers
“would not qualify as highly compensated employees” because “their day
rate does not constitute payment on a salary basis.” U.S. Dep’t of Labor,
Wage & Hour Div., Opinion Letter FLSA2020-13, 2020 WL 5367070, *1
(Aug. 31, 2020). This “conclusion is further supported by [the Department]
having specified certain instances when exempt executive, administrative, or
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professional employees may be paid a daily rate while not more generally
permitting a day rate to satisfy the salary basis test.” Id. at *4 n.27 (noting as
an example 29 C.F.R. § 541.709, which exempts certain motion-picture
employees from complying with the salary-basis test at all). So the
Department “knows how to include in the exemption certain employees
whose pay is calculated on a daily basis; it has chosen not to do so broadly.”
Id. “The familiar ‘easy-to-say-so-if-that-is-what-was-meant’ rule of
interpretation has full force here.” Id. (cleaned up) (quoting C.I.R. v. Beck’s
Estate, 129 F.2d 243, 244 (2nd Cir. 1942)). And that same logic of course
applies to other daily rate provisions like § 541.604(b). We agree with the
respected Administrator.
Finally, federal district courts across the country have repeatedly
warned the energy industry that their daily-rate workers are subject to
§ 541.604(b)—regardless of how well they are compensated.
For example, in McQueen v. Chevron Corp., 2018 WL 1989937 (N.D.
Cal.), “Chevron argue[d] that the Plaintiffs are exempt from overtime
entitlement under the FLSA because the day rate they were paid exceeds
$1,000”—higher than the day rate Helix paid to Hewitt. Id. at *1. Like Helix
here, Chevron argued that “section 541.604(b) . . . does not apply to highly
compensated individuals, such as Plaintiffs, who earned over $100,000 per
year.” Reply in Support of Motion for Partial Summary Judgment, McQueen
v. Chevron Corp., 2017 WL 6997700. The district court rejected the
argument, holding that “the day rate compensation scheme . . . does not
satisfy the weekly salary requirement of the exemption defenses.” 2018 WL
1989937, at *1.
Likewise, in Wellman v. Grand Isle Shipyard, 2015 WL 2169786 (E.D.
La.), an energy company sought to avoid overtime on the basis of the highly
compensated employee exemption. Id. at *2. The district court noted that
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the “employees’ compensation need not be calculated weekly,” provided
that the compensation arrangement complies with the requirements of
§ 541.604(b). Id. The company noted that the plaintiff “received at least $455
in compensation during each week he worked as a Project Manager.” Id. at
*3. But as the district court pointed out in response, “this assertion does not
address the regulations’ requirement that the employment arrangement
must ‘include[] a guarantee of at least the minimum weekly required amount
paid,’” as required under § 541.604(b). 3
3
See also, e.g., Senegal v. Fairfield Indus., 2018 WL 6079354, at *7 (S.D. Tex.)
(entering summary judgment against oil and gas surveyor because it “multipl[ied] the days
worked by the employee’s day rate,” thereby paying Plaintiffs “based on the number of
days worked and not on a salary basis”); Snead v. EOG Res., 2018 WL 1151138, at *2 (W.D.
Tex.) (rejecting oil and natural gas company’s argument that “it [was] permitted to
calculate Plaintiff's pay on a day rate basis without losing this exemption pursuant to 29
C.F.R. § 541.604(b)” on the ground that “that regulation, like Section 602(a), requires ‘a
guarantee of at least the minimum weekly required amount paid on a salary basis regardless
of hours, days or shifts worked’”); Keen v. DXP Enters., 2016 WL 3253895, at *4 (W.D.
Tex.) (rejecting oil company’s claim that its pay arrangement “satisfied the ‘minimum
guarantee plus extra’ test set forth at 29 C.F.R. § 541.604” because the record showed
supervisors “would get paid for the days they worked, and that if they only worked one day
during the week, they would only be paid for one day”); Cator v. DXP Enters., 2016 WL
11580735, at *8 (W.D. Tex.), report and recommendation adopted, 2017 WL 11016498 (W.D.
Tex.) (highlighting “material fact issues,” including whether “plaintiff’s pay, that was
computed at a daily rate and actually received on a weekly basis, m[et] the salary basis test,”
and whether “the amount expected to be earned and actually earned by plaintiff during a
normal scheduled work week b[ore] a reasonable relationship to the amount guaranteed, if
any”). See also Hiser v. NZone Guidance, LLC, 2019 WL 2098110, at *4 (W.D. Tex.) (oil-
drill company admitting that Plaintiffs “were not paid on a salary basis, and did not receive
any guaranteed weekly compensation . . . irresepective of days worked” because they
“were paid a day-rate”).
Indeed, we are aware of just two district courts that have ever said that day-rate
employees in the energy sector are not subject to § 541.604(b)—and neither offered any
analysis other than citing our withdrawn opinion in Faludi and/or the dissent in Hewitt II.
See Scott v. Antero Res. Corp., 2021 WL 2012326, at *6–*8 (D. Colo.); Sanchez v.
Schlumberger Tech. Corp., 2020 WL 1445639, at *4 (S.D. Tex.). Neither of the district
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In short, our decision today is hardly novel—and can hardly come as
a surprise to the oil and gas industry.
C.
1. Helix’s main response is that it is not required to comply with
§ 541.604(b), because Hewitt is a “highly compensated employee” under
§ 541.601. In Helix’s view, if an employee satisfies § 541.601, then there is
no need to “also” satisfy § 541.604(b). But § 541.601 expressly imposes a
salary-basis test. The text of § 541.601 makes clear that an employee’s
“‘[t]otal annual compensation’ must include at least $684 per week paid on a
salary . . . basis.” 29 C.F.R. § 541.601(b)(1) (emphases added). 4 So Hewitt
cannot be a “highly compensated employee” under § 541.601 unless his total
annual compensation satisfies the salary-basis test. And the only way for an
employee to have his pay “computed on a daily basis” “without violating the
salary basis requirement” is to comply with § 541.604(b). Id. § 541.604(b).
Alternatively, Helix theorizes that it does not have to comply with §
541.604(b) because it complies with § 541.602. But even accepting Helix’s
premise about § 541.602, it should go without saying that an employer must
comply with all relevant regulations. Helix admits that Hewitt’s pay is
“computed on a daily basis,” so it must comply with § 541.604(b). Indeed,
§ 541.604(b) makes this explicit: It says that an otherwise “exempt”
employee who is paid a daily rate “los[es] the exemption” and “violat[es]
courts in Faludi or Hewitt addressed, one way or another, whether daily-rate workers must
comply with § 541.604(b). See Faludi v. U.S. Shale Sols. LLC, 2017 WL 5969261, at *8
(S.D. Tex.) (citing § 541.604(b) only for the proposition that “[a]n employee’s
compensation need not be calculated weekly”); Hewitt, 2018 WL 6725267, at *3 (analyzing
only § 541.602).
4
The previous version of § 541.601 (which governs this case) requires
compensation of “at least $455 per week.” Id. § 541.601(b)(1) (2014).
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the salary basis requirement” unless the employer complies with §
541.604(b).
Notably, nothing in the text of either § 541.602 or § 541.604(b)
indicates that those provisions apply differently based on how much the
employee is paid. To the contrary, the same “salary basis” language that
appears in the highly compensated employee regulation also appears in the
regulations governing more modestly paid executive, administrative, and
professional employees. Like their “highly compensated” counterparts,
these employees are exempt only if they are “[c]ompensated on a salary
basis.” See id. § 541.100(a)(1) (executive employees); id. § 541.200(a)(1)
(administrative employees); id. § 541.300(a)(1) (professional employees).
There is no principled basis for applying or ignoring § 541.604(b) based on
how much the employee is paid.
2. Helix also contends that our understanding of the salary-basis
test conflicts with Litz v. Saint Consulting Group, Inc., 772 F.3d 1 (1st Cir.
2014), and Anani v. CVS RX Services, Inc., 730 F.3d 146 (2nd Cir. 2013). To
be sure, there is stray language in Anani that appears to be in tension with the
approach we take today. See Anani, 730 F.3d at 149 (“We perceive no cogent
reason why the requirements of C.F.R. § 541.604 must be met by an
employee meeting the requirements of C.F.R. § 541.601.”); see also Litz, 772
F.3d at 5 (quoting Anani but noting that “[p]laintiffs ‘do not take a position
on this issue’”).
But there is no actual conflict here. That is for one simple reason that
should be apparent from the face of the regulations: Litz and Anani involve
pay calculated “on a weekly, or less frequent basis” (29 C.F.R.
§ 541.602(a))—and not pay “computed on . . . a daily . . . basis”
(§ 541.604(b)). See Litz, 772 F.3d at 2 (employees were “guaranteed a
minimum weekly salary of $1,000 whether they bill[ed] any hours or not”)
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(emphasis added); Anani, 730 F.3d at 148 (employee’s “base weekly salary
was guaranteed, i.e. to be paid regardless of the number of hours . . . actually
worked”) (emphasis added).
Indeed, the Sixth Circuit has already distinguished Litz and Anani on
precisely this textual ground. As that court explained, “Anani and Litz
involved plaintiffs who . . . were undisputedly guaranteed weekly base salaries
above the qualifying level.” Hughes, 878 F.3d at 189–90 (emphasis added).
See also id. (rejecting the argument that the court “should pay no attention to
§ 541.604(b),” and explaining that Litz and Anani involved workers “whose
pay was undisputedly calculated ‘on a weekly, or less frequent basis’”)
(citing 29 C.F.R. § 541.602(a)).
We agree. There are both textual and precedent-based grounds for
distinguishing this case from Litz and Anani. By contrast, there are no textual
or precedent-based grounds for distinguishing this case from the opinions of
the Sixth and Eighth Circuits and the Labor Department.
3. Finally, Helix contends that extending overtime to highly-paid
employees like Hewitt defies the purpose of the FLSA. In its en banc
briefing, Helix protests that Hewitt’s compensation at “well over $200,000
each year” is “a far cry from the wage practices against which the FLSA was
created to protect”—and that “[a] highly compensated employee like
Hewitt is not the worker the FLSA was enacted to protect.”
But it should go without saying that we are governed by the text of the
FLSA and its implementing regulations, not some unenumerated purpose.
See Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018). 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.
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Accordingly, the Supreme Court, our court, and the Secretary of
Labor have all acknowledged that “employees are not to be deprived of the
benefits of the [FLSA] simply because they are well paid.” Jewell Ridge Coal
Corp, 325 U.S. at 167. See also Barrentine v. Arkansas-Best Freight Sys., Inc.,
450 U.S. 728, 741 n.18 (1981) (same); Parrish, 917 F.3d at 388 (same); 69 Fed.
Reg. 22,122-01 (same). In Parrish, for example, we held that “the FLSA . . .
was intended to cover well-paid, well-trained workers like plaintiffs,” and
thus “rejected[] [the] assertion ‘that [p]laintiffs are not the sort of low-wage
employees the FLSA is designed to protect.’” 917 F.3d at 388. In fact, we
granted overtime status to workers paid more than Hewitt—pay that “could
well exceed $1,000 per day,” id. at 384, totaling over “$300,000 per year,”
280 F. Supp. 3d 954, 962 (W.D. Tex. 2017).
Indeed, if the Secretary had wanted to exempt employees based solely
on the fact that they are well compensated, the regulations could have been
written accordingly. In fact, as the Labor Department has publicly noted, “a
number of commenters” have “urge[d] the Department to abandon the
salary basis test entirely, arguing that [the] requirement serves as a barrier to
the appropriate classification of exempt employees.” 69 Fed. Reg. 22,176.
But the Secretary has so far rejected those requests, and instead required both
that the employee be paid at least a certain amount of compensation and that
the compensation be paid “on a salary basis.” See id. (“[T]he Department
has decided that [the salary basis test] should be retained.”). See also 3
Employ. Coordinator Comp. § 3:26 (“Note that a highly
compensated employee must still meet the requirements of the salary basis
test, being paid at least $684 on a salary basis, to be exempt from the overtime
requirements. Thus, an employee earning over $100,000 will not necessarily
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be a highly compensated employee if the employee’s compensation is paid
on an hourly basis.”). 5
***
Our job is to follow the text—not to bend the text to avoid perceived
negative consequences for the business community. That is not because
industry concerns are unimportant. It is because those concerns belong in
the political branches, not the courts. “We will not alter the text in order to
satisfy the policy preferences” of any person or industry. Barnhart v. Sigmon
Coal Co., 534 U.S. 438, 462 (2002). “These are battles that should be fought
among the political branches and the industry.” Id.We reverse the grant of summary judgment to Helix and remand for
further proceedings consistent with this opinion.
5
The amici put forth additional atextual theories that even Helix does not embrace.
We likewise decline to entertain them.
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James C. Ho, Circuit Judge, concurring:
The court today holds that Michael Hewitt is not exempt from
overtime under the Fair Labor Standards Act (FLSA) unless his employer,
Helix Energy Solutions Group, compensates him in accordance with 29
C.F.R. § 541.604(b). As the court explains, its textualist reading of §
541.604(b) is also supported by recent opinions of the Sixth and Eighth
Circuits as well as the Labor Department.
As the court also notes, subsequent to our initial panel opinion in this
case, an armada of amici “put forth additional atextual theories that even
Helix does not embrace.” Ante, at 17 n.5. I concur and write separately to
address amici’s contentions, as well as various additional arguments by the
dissenters that Helix and amici do not make, and explain why they are all at
war with the text.
I.
To begin with, the amicus brief filed by the States of Mississippi,
Alabama, Louisiana, Montana, and Utah boils down to the following
argument: We should read the regulations not to impose a salary-basis test,
because the FLSA does not impose such a test. In sum, the five states ask us
to construe the regulatory text to avoid a conflict with the statutory text. The
lead dissent makes the same point—it emphasizes that the FLSA “exempts
employees based on duties not dollars.” Post, at 46.
But if it sounds like the five states are actually inviting us to ignore text,
it’s because they are. After all, the five states fully admit that the regulations
expressly impose a salary-basis test.
So how exactly do they propose that we construe the regulations to
avoid a salary-basis test, when the regulations explicitly apply a salary-basis
test? See, e.g., 29 C.F.R. § 541.100(a)(1) (requiring that executive employees
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be “[c]ompensated on a salary basis”); id. § 541.600(a) (“To qualify as an
exempt executive[] . . . employee . . . an employee must be compensated on a
salary basis.”); id. § 541.601(b)(1) (requiring that a highly compensated
employee’s total compensation include “at least $684 per week paid on a
salary . . . basis”).
Our duty is to interpret the text—not to ignore it. Recall National
Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012). There the
Supreme Court construed the Affordable Care Act to avoid invalidity—just
as the five states invite us to do here.
But it’s one thing to construe a mandate as a “tax.” Id. at 574. It’s
quite another thing to construe a mandate as nothing at all. Yet that is
precisely what the five states ask us to do here—to construe the salary-basis
mandate as nothing at all. That is not interpreting the text—that is
invalidating it.
As the lead dissent admits, “whether the salary basis [test] is invalid
is not the question before this court.” Post, at 50. The question presented
by the five states is not whether we can hold the regulation invalid, but
whether we can construe the regulation to avoid conflict with statutory text.
And the five states fully acknowledge that, in construing regulatory text to
avoid statutory conflict, we must construe the text “fairly.”
These admissions should be fatal to this argument. Because § 541.601
imposes a “salary basis” requirement—while § 541.604(b) applies when an
employee’s pay is “computed on a daily basis.” You cannot “fairly”
construe these regulations by simply reading those words out of the text.
Tellingly, Helix’s supplemental en banc brief, filed two weeks after
the states’ amicus brief, fails to devote a single word to this theory. Nor was
the amicus joined by the State of Texas—the oil and gas capital of the world
(and Helix’s home state).
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II.
For their part, the Independent Petroleum Association of America
and the Texas Oil and Gas Association theorize that the court’s reading of
the plain text must be rejected because it is mathematically “illogical.”
Their argument goes something like this: To be exempt under §
541.601 as Helix claims, an employee must meet certain income thresholds—
namely, a weekly minimum salary of $455 per week, or $23,660 annualized,
and minimum total annual pay of $100,000. If you divide the latter figure
($100,000) by the former ($23,660), you get “a correlation between the
guarantee amount and the amount actually earned of 422.7 percent,” as the
Texas Oil and Gas Association observes. That’s “an over four-to-one ratio,”
the Independent Petroleum Association of America emphasizes. The lead
dissent makes the same point, albeit with one additional calculation: It
subtracts the weekly minimum salary from the minimum total annual
compensation and notes that the balance is “three times the base salary.”
Post, at 42. But the underlying mathematics remain the same.
Next, you take that ratio and compare it to the reasonable-relationship
test under § 541.604(b). As amici point out, the reasonable-relationship test
contemplates smaller ratios—no more than “a weekly ratio of 150 percent of
the guarantee,” according to the Texas Oil and Gas Association. The
Independent Petroleum Association of America similarly concludes that
“the § 541.604(b) reasonable relationship is satisfied if the additional
amounts do not exceed approximately 50% of the guaranteed amount.”
Amici have been pressing this mathematical argument since the en
banc petition stage. Yet the argument appears nowhere in Helix’s briefs.
And for good reason. I’ve heard of using dictionaries to discern the
plain meaning of legal texts. I’ve never heard of using a calculator. Tellingly,
amici do not cite a single case doing so.
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Moreover, this is not the case to start. Because amici’s mathematical
calculations prove exactly nothing. When all is said and done, amici’s point
amounts to this: An employee’s compensation can satisfy the income level
requirements of § 541.601—yet violate the salary-basis test requirements of
§ 541.604(b).
Okay, but so what? I thought everyone agreed that the regulations
impose a three-prong test: (1) the performance of certain duties, (2) income
over a certain level, and (3) the salary-basis test. These are obviously separate
and distinct requirements—the text makes this clear, and the parties do not
dispute it. So an employer cannot prevail unless it meets all three
requirements. And it is of course possible to satisfy one prong but not
another. If that is all that amici is setting out to prove, then mission
accomplished—but how this leads to judgment for Helix is a mystery.
Bottom line: If our goal is to follow the text, we should follow the
text—not penumbras formed by emanations divined by a calculator. Cf.
Griswold v. Connecticut, 381 U.S. 479, 484 (1965).
III.
In addition, the dissenters offer three textual arguments that neither
Helix nor any amici embrace.
First, the lead dissent “reiterate[s] that the text of § 541.601 makes no
mention of § 541.604.” Post, at 38. But neither do the regulations governing
executive, administrative, and professional employees. See 29 C.F.R. §§
541.100, .200, .300. So the dissent would render § 541.604(b) surplusage.
Moreover, § 541.604(b) refers explicitly to the “salary basis” test—so the
dissent is wrong to say there is no cross-reference here. See id. § 541.604(b).
What’s more, over a century of case law confirms that courts routinely
construe one provision to apply to another, regardless of the absence of a
cross-reference. See, e.g., Lockhart v. United States, 546 U.S. 142, 148 (2005)
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(Scalia, J., concurring) (collecting cases holding that “Congress . . . may
[enact] exempt[ions] . . . by ‘fair implication’—that is, without an express
statement”) (emphasis added). The dissent does not cite any authority for
declining to apply one provision to another based on the absence of a cross-
reference. Not surprisingly, then, the Sixth and Eighth Circuits have rejected
the dissent’s reading—as do we. See Hughes v. Gulf Interstate Field Servs.
Inc., 878 F.3d 183, 189 (6th Cir. 2017) (rejecting suggestion that “we should
pay no attention to § 541.604(b)”); Coates v. Dassault Falcon Jet Corp., 961
F.3d 1039, 1042 (8th Cir. 2020) (agreeing that the “general” salary-basis rule
is “subject to numerous interpretive rules” including § 541.604(b)). 1
Second, the lead dissent relies on the following two sentences from 29
C.F.R. § 541.0, which summarizes various FLSA regulations: “Subpart G
contains regulations regarding salary requirements applicable to most of the
exemptions, including salary levels and the salary basis test. Subpart G also
contains a provision for exempting certain highly compensated employees.”
The dissent claims this passage somehow must mean that the latter provision
is exempt from the former—that highly paid workers covered by § 541.601
are exempt from § 541.604(b). But there’s a difference between merely
summarizing two provisions and specifying how the two provisions interact
with one another. Suppose we sum up our constitutional amendments as
follows: “The amendments contain various individual rights, including
freedom of speech. The amendments also contain a provision authorizing
1
The dissent by Judge Wiener suggests Hughes and Coates do not apply here
because the workers there did not perform the duties of highly compensated employees—
that is, they were not “bosses” or “supervisors.” Post, at 56–57. The dissenters’ reading
of case law is as curious as their interpretation of text. Here’s what Hughes said: “The
duties and salary-level tests are not in question here; the ‘sole issue’ is ‘whether Hughes
and McDonald met the ‘salary basis’ test.’” 878 F.3d at 188. Similarly, Coates noted that
the “salary basis” requirement was the only “issue on this appeal.” 961 F.3d at 1042.
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states to regulate alcohol.” Would that mean that the 21st Amendment is
exempt from the 1st Amendment? Of course not. See, e.g., 44 Liquormart,
Inc. v. Rhode Island, 517 U.S. 484 (1996). Moreover, this case is even clearer.
The 21st Amendment does not mention freedom of speech. By contrast, §
541.601 expressly incorporates the salary-basis test. In sum, nothing in §
541.0 justifies negating the clear text of § 541.604(b).
Finally, the separate dissent by Judge Wiener claims that the
majority’s textualist approach must “crumble” because, he worries, a
“minimum [weekly] guarantee” under § 541.604(b) (1) “could be subject to
reduction” (in other words, not “minimum”), (2) “could be disbursed daily
rather than ‘weekly’” (in other words, not “weekly”), and (3) “could not be
predetermined” (in other words, not “guaranteed”). Post, at 60. But those
worries will be realized only if you ignore the words “minimum,” “weekly,”
and “guarantee.” Not surprisingly, then, neither Helix nor any of the amici
make this argument, either.
IV.
The implicit message of the industry amici (and the dissenters) is that
it is absurd to grant FLSA overtime to employees as highly compensated as
Hewitt. But there are several problems with this absurdity argument. 2
2
For example, in his separate dissent, Judge Wiener says he “cannot fathom how
a majority of the active judges of this court can vote to require Helix to pay overtime to
Hewitt.” Post, at 52. But earlier in this case, he was able not only to fathom, but to vote
for, that very result. See Hewitt v. Helix Energy Sols. Grp., 956 F.3d 341, 342, 344 n.4 (5th
Cir. 2020) (opinion of Ho, J., joined by Wiener and Higginson, JJ.) (Hewitt was “entitled
to overtime” because “Helix did not pay Hewitt on a salary basis, as § 541.604(b) expressly
requires”). The only thing that has changed since then (besides the appearance of what
the dissent fondly calls the “oyl biddness” amici, post, at 62) is the additional authority
from the Eighth Circuit and the Labor Department.
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To begin with, the Supreme Court, our court, and the Secretary of
Labor have all observed that “employees are not to be deprived of the
benefits of the [FLSA] simply because they are well paid.” Jewell Ridge Coal
Corp, 325 U.S. at 167. See also Barrentine v. Arkansas-Best Freight Sys., Inc.,
450 U.S. 728, 741 n.18 (1981) (same); Parrish v. Premier Directional Drilling,
917 F.3d 369, 388 (5th Cir. 2019) (same); 69 Fed. Reg. 22,122-01 (2004)
(same). In Parrish, for example, we granted overtime status to workers paid
more than Hewitt—pay that “could well exceed $1,000 per day,” 917 F.3d at
384, totaling over “$300,000 per year,” 280 F. Supp. 3d 954, 962 (W.D.
Tex. 2017). Congress has likewise rejected efforts to impose income limits
on FLSA overtime protections. See ante, at 2 (citing examples).
So amici are inviting us to declare all three branches of government
absurd. The court rightly declines the invitation.
Moreover, the notion that highly compensated employees should
never be entitled to overtime conflicts with the position of every member of
this court. We all agree—and Helix concedes—that FLSA regulations
impose a three-prong test for exempting highly compensated employees.
Under that three-prong test, it is not enough that an employee is highly
compensated. The employee must also perform certain duties, as well as
satisfy the salary-basis test. A high income alone is never enough to exempt
an employee from overtime. See, e.g., 29 C.F.R. § 541.601(d) (“This section
applies only to employees whose primary duty includes performing office or
non-manual work. Thus, [certain workers] are not exempt under this section
no matter how highly paid they might be.”) (emphasis added).
Furthermore, what is so absurd about requiring Helix to follow the
regulations? Helix can easily satisfy the salary-basis test and thereby avoid
overtime—as I’ve previously explained, and Helix has never disputed. See,
e.g., Hewitt v. Helix Energy Sols. Grp., 983 F.3d 789, 801 (5th Cir. 2020) (Ho,
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J., concurring), vacated on petition for rehearing en banc, 989 F.3d 418 (5th Cir.
2020). Just provide Hewitt a minimum weekly guarantee of, say, $4,000.
That’s the economic equivalent of Hewitt’s daily rate of $963. Id. Such an
arrangement would benefit both parties. Helix would avoid paying Hewitt
overtime. And Hewitt would enjoy a stable, predictable weekly income.
Finally, amici’s suggestion of absurdity misunderstands the FLSA
itself.
Many people conceptualize overtime as an incentive for workers to
seek additional hours in order to earn higher income. Viewed through that
lens—as an encouragement to work overtime—it may be tempting to think of
overtime primarily as a benefit for workers at the bottom of the income scale.
But that is not the only way—and perhaps not even the best way—to
understand the FLSA. Historically, “time and a half” has been understood
as a “penalty” designed to “discourage” overtime. See, e.g., Missel v.
Overnight Motor Transp. Co., 126 F.2d 98, 104–5 (4th Cir. 1942), aff’d, 316
U.S. 572 (1942) (collecting cases describing overtime as a “penalty”
designed to “discourage overtime”). Congress theorized that “the overtime
rate . . . will be sufficiently expensive . . . that employers rather than pay
overtime will spread employment.” Id. at 104.
Congress enacted the FLSA in the depths of the Great Depression.
Unsurprisingly, then, Congress sought to discourage overtime in order to
encourage employers to hire more workers. As the Supreme Court explained
at the time, “one of the fundamental purposes of the Act was to induce
worksharing and relieve unemployment by reducing hours of work.” Missel,
316 U.S. at 577 (quotations omitted). The 50 percent overtime penalty
incentivizes employers to hire two workers to work 40 hours, rather than one
worker to work 80 hours. See, e.g., Mechmet v. Four Seasons Hotels, Ltd., 825
F.2d 1173, 1176 (7th Cir. 1987) (Congress enacted the FLSA “to spread work
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and thereby reduce unemployment, by requiring an employer to pay a penalty
for using fewer workers to do the same amount of work as would be necessary
if each worker worked a shorter week”).
So the goal of the Act was not to induce overtime, but to avoid it. The
FLSA achieves its ends when no employer pays overtime—when employers
meet their labor needs by hiring more workers, not by requiring more hours.
To be sure, the FLSA burdens the business community and the
freedom of contract. But the goal of the Act is not to benefit employers, but
to increase employment.
And the social benefits of full employment should be obvious.
Communities are better off when people are employed rather than idle.
Millions of Americans prefer more free time over more money. And that is
so regardless of how much one is paid. The desire to rest, recreate, and spend
time with loved ones is not confined to any particular income strata.
V.
Amici do not hide their displeasure with the court’s reading of the
governing regulations. The Texas Oil and Gas Association groans that “the
Panel’s Decision Threatens the Country’s Hydrocarbon Industry”—while
the Independent Petroleum Association of America and the Offshore
Operators Committee blare that “THE PANEL’S ERRANT HOLDING
NEGATIVELY IMPACTS A VITAL INDUSTRY.” The dissent by Judge
Wiener likewise condemns the majority—whose views he once endorsed, see
ante, at 23 n.2—of causing a “vital industry” that “provides more than
400,000 direct jobs” to “suffer needlessly and excessively.” Post, at 62.
As judges, however, we follow the law without regard to popularity.
See, e.g., Gee v. Planned Parenthood of Gulf Coast, Inc., 139 S. Ct. 408, 410
(2018) (Thomas, J., dissenting from the denial of certiorari) (“We are not ‘to
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consult popularity,’ but instead to rely on ‘nothing . . . but the Constitution
and the laws.’”) (quoting Federalist No. 78, pp. 469–470 (C. Rossiter
ed. 1961) (A. Hamilton)). We ignore the booing of the crowd. Cf. Wilson v.
Houston Community College System, 966 F.3d 341, 345 & n.1 (5th Cir. 2020)
(Ho, J., dissenting from denial of rehearing en banc).
In this case, the unhappy crowd happens to be the oil and gas industry.
But it does not matter which crowd is booing. We apply the law as written—
not as the industry would have written it. Cf. Ramirez v. Guadarrama, 2 F.4th
506, 511 (5th Cir. 2021) (Ho, J., concurring in denial of rehearing en banc)
(“As judges, we apply our written Constitution, not a woke Constitution.”).
As demonstrated above, amici’s arguments are at war with the text.
So we cannot credit them, no matter how important (or upset) the industry
may be. If the court’s ruling today is bad for the industry (notwithstanding
how easy it would be for Helix to comply with the salary-basis test), that is a
policy consideration for the political branches—not the courts.
Justice Scalia once wrote: “[S]uch questions as ‘Who wins?’ ‘Will
this decision help future plaintiffs?’ ‘Will it help future defendants?’ ‘Is this
decision good for the ‘little guy’?’ ‘Is it good for business?’ . . . Questions
like these are appropriately asked by those who write the laws, but not by those
who apply them.” Antonin Scalia & Bryan A. Garner, Reading
Law: The Interpretation of Legal Texts 352–53 (2012)
(emphasis added).
This principle is applied not only by judges, but by Executive Branch
officials as well. Shortly after he took office—and before his Labor
Department issued an opinion agreeing with our reading of its regulations
(ante, at 5 & n.2, 10–11)—Secretary Eugene Scalia delivered an address in
which he set forth the “principles that will guide me as Labor Secretary.”
Eugene Scalia, Address at the Federalist Society’s 2019 National Lawyers
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Convention (Nov. 15, 2019). His address noted his personal policy preference
for free markets over legislative ordering, opining that excessive regulation
“stifle[s] American innovation and productivity” and “burden[s] the
economy.” Id. But he emphasized that his duty as a “principal officer”
under the Constitution is not to construe laws to favor business, but to help
the President fulfill his duty under Article II “to take care that the laws be
faithfully executed.” Id. “[A]s Secretary of Labor I have a constitutional
responsibility for the agency’s enforcement activities under the statutes it
administers.” Id. Months later, the Department issued its opinion agreeing
with our earlier panel decision in this case and concluding that, absent some
special rule, daily rate workers “would not qualify as highly compensated
employees” because “their day rate does not constitute payment on a salary
basis.” U.S. Dep’t of Labor, Wage & Hour Div., Opinion Letter FLSA2020-
13, 2020 WL 5367070, *1 (Aug. 31, 2020).
***
Amici may be disappointed, but they should not be surprised that the
court today rejects their atextualist theories.
There’s no such thing as a part-time textualist. If we’re not textualists
in every case, then we’re not really textualists at all. See, e.g., Cole v. Carson,
935 F.3d 444, 479 (5th Cir. 2019) (Ho & Oldham, JJ., dissenting)
(“Originalism for me, but not for thee, is not originalism at all.”). We’re not
binding ourselves to the text if we follow it only when we like the result.
Textualism is either a matter of principle or a talking point.
We follow the text where it leads. Here, the text leads the court to
side with labor over industry. So be it. I concur.
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Edith H. Jones, Circuit Judge, joined by Owen, Chief Judge, and
Wiener, Elrod, and Southwick, Circuit Judges, dissenting:
Appellant Hewitt is an experienced toolpusher 1 who was paid over
$200,000 annually for supervising twelve to fourteen offshore oil and gas
workers, comprising the drill crew, deck crew and subsea department of
Helix’s offshore operations. 2 Fewer than six percent of all Americans are
paid as much as Hewitt. 3 Downplaying or omitting these and related
uncomfortable facts, the majority employs their “textualist” reading of Fair
Labor Standards Act regulations to provide Hewitt time-and-a-half on his
hourly rate if he worked more than forty hours weekly during his offshore
hitches.
1
Toolpusher, SCHLUMBERGER: OILFIELD GLOSSARY, https://glossary.oilfield.
slb.com/en/terms/t/toolpusher (last accessed June 29, 2021) (“The location supervisor
for the drilling contractor. The toolpusher is usually a senior, experienced individual who
has worked his way up through the ranks of the drilling crew positions. His job is largely
administrative, including ensuring that the rig has sufficient materials, spare parts and
skilled personnel to continue efficient operations. The toolpusher also serves as a trusted
advisor to many personnel on the rigsite, including the operator’s representative, the
company man.”).
2
Toolpushers are important players in the rig leadership structure. See The Key
Players of the Deepwater Horizon, WALL ST. J. (Aug. 26, 2010),
https://www.wsj.com/articles/SB10001424052748703632304575451761794054340
(identifying three toolpushers among the “key players” on the Deepwater Horizon when
disaster befell the rig).
3
For example, Census Bureau data indicates that individuals earning $200,000
annually in 2014 were among the top two percent of Americans reporting individual
income. See Andrew Van Dam, What Percent Are You? WALL ST. J. (Mar. 2, 2016),
https://graphics.wsj.com/what-percent/. Hewitt accepted his job with Helix in 2014 and
left in 2017. In 2017, based on data from the Current Population Survey series, a household
earning $200,000 “was percentile 93.1%.” 2017 Household Income Percentile Calculator for
the United States, DQYDJ, https://dqydj.com/household-income-percentile-calculator-
united-states-2017/ (last visited Aug. 17, 2021) (based on data “for full-year January to
December 2016”).
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The FLSA, however, exempts executive, administrative, and
professional workers from overtime. 29 U.S.C. § 213(a)(1) (the “EAP”
exemption). And the regulations further presumptively exclude such
workers who are “highly compensated”—at half of Hewitt’s salary.
29 C.F.R. § 541.601 (the “HCE” provision). For a statute designed to
elevate the workingman, the majority’s result seems counterintuitive, and in
fact it is incorrect. The majority’s result also runs counter to two other
circuits’ analysis. There is a much better textual interpretation, as we
demonstrate below, which offers the additional nontrivial benefit of
remaining faithful to the statutory text.
I. BACKGROUND
Hewitt oversaw the drill crew, the deck crew, and the subsea
department; completed personnel evaluations; ensured compliance with
company policies; led safety meetings; and sometimes covered for the rig
superintendent. 4 Consistent with these managerial responsibilities, Hewitt
was paid, on a biweekly basis, 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 salary
totaled over $200,000 per year, more than double the then-required amount
of $100,000 needed to qualify as a highly compensated employee under
§ 541.601. 5
4
See Anne Kinsey, The Salary of a Toolpusher, HOUSTON CHRON. (Oct. 7, 2020),
https://work.chron.com/salary-toolpusher-8125.html (“Toolpushers are senior oil
drilling employees who are in charge of entire departments of oil drilling professionals.
They combine their knowledge of the oil industry with leadership skills to ensure that rig
personnel have all the equipment and tools they need for daily operations.”).
5
Since the filing of this case, § 541.601 was revised to increase the $100,000 total
annual compensation threshold to $107,432. See § 541.601(a)(1). Similarly, the $455
weekly salary requirement was raised to $684. See id. at (b)(1). This opinion refers to the
pre-increase amounts that were applicable to the facts raised in this case.
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Hewitt concedes he performed the duties of an FLSA-exempt
executive employee and was generously paid. But like many oil and gas
production employees, Hewitt’s salary was calculated at a day rate. Homing
in on the “salary basis” component of the FLSA’s HCE regulation, Hewitt
seeks additional overtime compensation and denies that he was an exempt
employee.
The district court rejected Hewitt’s claim, only to be reversed by a
divided panel’s decision that Hewitt qualifies for overtime compensation.
Upon en banc reconsideration of the appeal, a majority of this court now
erroneously holds that Hewitt was not a highly compensated employee under
the regulations. We disagree.
II. DISCUSSION
Hewitt is an FLSA-exempt executive employee for three reasons.
First, he satisfies the regulations’ HCE provision, § 541.601, which applies
the statutory exemption to highly compensated employees. Second, the
HCE provision, taken together with the regulatory text, structure, and
history, plainly does not incorporate the separate provision, § 541.604, that
is the textual sine qua non of the majority’s analysis. Third, our construction
of the regulations harmonizes with the statute, while the majority’s reasoning
creates discord.
A. Hewitt Is Exempt Under § 541.601’s HCE Provision
We begin with the language of § 541.601 that is pertinent to a holistic
interpretation. 6 Employees who are exempt as “highly compensated” under
6
The EAP exemption does not apply to highly paid employees who do not perform
executive, administrative, or professional duties. See § 541.601(d) (explaining that the
provision “applies only to employees whose primary duty includes performing office or
non-manual work,” while it excludes, “no matter how highly paid,” “non-management
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§ 540.601 must receive over $100,000 in “total annual compensation,” and
perform “one or more of the exempt duties or responsibilities of an
executive, administrative or professional employee,” § 541.601(a)(1).
(Hewitt concedes he fulfilled these requirements.)
The next subsection defines “total annual compensation” to “include
at least $455 per week paid on a salary or fee basis as set forth in §§ 541.602
and 541.605,” 7 and the “[t]otal annual compensation may also include
commissions, nondiscretionary bonuses and other nondiscretionary
compensation earned during a 52-week period.” § 541.601(b)(1).
Section 541.601(b)(2) refines the definition by adding a catch-up
provision. If, at the end of the 52-week period, the $100,000 requirement
has not been met, “the employer may, during the last pay period or within
one month after the end of the 52-week period, make one final payment
sufficient to achieve the required level.” § 541.601(b)(2).
Because the definition of “total annual compensation” includes a
minimum weekly payment on a salary basis set forth in § 541.602, we turn to
that provision’s general rule:
An employee will be considered to be paid on a “salary basis”
within the meaning of this part if the employee [1] regularly
receives each pay period on a weekly, or less frequent basis,
[2] a predetermined amount constituting all or part of the
employee’s compensation, [3] which amount is not subject to
production-line workers and non-management employees in maintenance, construction
and similar occupations such as carpenters, electricians, mechanics, plumbers, iron
workers, craftsmen, operating engineers, longshoremen, construction workers, laborers
and other employees . . . .”).
7
Whether Hewitt may have been paid on a “fee basis” is not at issue in this case.
See § 541.605 (defining “fee basis”).
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reduction because of variations in the quality or quantity of the
work performed.
§ 541.602(a)(numbers added). The next subpart specifies that “an exempt
employee must receive the full salary for any week in which the employee
performs any work without regard to the number of days or hours worked,”
but “need not be paid for any workweek in which they perform no work.”
§ 541.602(a)(1).
Hewitt satisfies the plain terms of the HCE test. He received his
paycheck biweekly, as required by the first part of the salary basis test. And
in any week in which he performed any work he was guaranteed a
“predetermined amount” of at least $963 (his day rate), 8 which represented
“part of” his compensation and was more than double § 541.601’s $455
minimum salary. Finally, Hewitt’s $963 predetermined pay was not “subject
to reduction because of variations in the quality or quantity of the work
8
The idea that a “predetermined amount” can be computed on an hourly (or daily)
basis and still count as a “salary” is hardly novel. The Department of Labor and courts
under previous versions of the FLSA regulations were clear on this point. See Opinion
Letter No. 395 [1961–1966 Wages–Hours Transfer Binder] Lab. L. Rep. (CCH) ¶
30,996.23 (Sept. 22, 1965) (addressing “highly-paid administrative and professional
employees employed by consulting firms on an irregular, project-by-project basis,” and
concluding that “[t]he salary requirement would be satisfied by a payment in the prescribed
amount which is guaranteed to the employee for each week in which he performs any work
on a project or projects for the employer, even though this is only a portion of the
compensation paid him for such work and the total amount continues to be measured by an
hourly or daily rate” (emphasis added)); see also Douglas v. Argo-Tech Corp., 113 F.3d 67, 71
(6th Cir. 1997) (recognizing “[a]n employee is salaried even if his compensation consists of
a guaranteed predetermined amount plus additional compensation,” and finding support
in the 1965 Opinion Letter for the proposition that “hourly employees may be salaried if
they are guaranteed a predetermined number of paid hours” (citations omitted)); Nairne
v. Manzo, No. 86–0206, 1986 WL 12934, at *3 (E.D. Pa. Nov. 14, 1986) (Scirica, J.)
(unpublished) (considering how many hours an hourly employee was guaranteed, and
citing the 1965 Opinion letter for the proposition that “the salary requirement is met even
if the employee is paid on an hourly basis, as long as the employee is guaranteed the
minimum weekly requirement”).
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performed.” He was paid that minimum if he worked a single second of a
day and was paid regardless of the quality of his work. Thus, “for any week
in which [Hewitt] perform[ed] any work” he was paid at least $963 “without
regard to the number of days or hours worked.”
It follows that the majority should have started—and ended—with the
plain terms of § 541.602 to determine that Hewitt satisfied the salary basis
test. Indeed, two other circuits have similarly concluded that once
§ 541.602’s salary basis test is satisfied, that ends the analysis under the HCE
exemption. Anani v. CVS RX Servs., Inc., 730 F.3d 146, 149 (2d Cir. 2013)
(“We perceive no cogent reason why the requirements of [] § 541.604 must
be met by an employee meeting the requirements of [] § 541.601.”); Litz v.
Saint Consulting Grp., Inc., 772 F.3d 1, 5 (1st Cir. 2014) (agreeing with Anani
and noting that the plaintiffs “sensibly abandoned” the argument that the
reasonable relation provision [§ 541.604] “applies to highly compensated
employees”).
Hewitt and the majority dodge the clear fit between Hewitt’s total
annual compensation and the exact requirements of § 541.601, as they
contend instead that Hewitt was not compensated on a “salary basis.” By
artful use of italics, ellipses, and other misdirection, the majority describe
§ 541.602’s salary basis test as an incomplete “general” rule to justify
looking outside of § 541.602 to § 541.604 whenever an employee’s pay is
calculated on a daily basis. Ante, at __. That assessment is plainly wrong.
Section 541.602 sets out the “general rule” in subpart (a), which is
supplemented by seven “exceptions” in its subpart (b) that together form a
comprehensive salary basis test. Nothing in § 541.602 points to § 541.604.
The majority also edits § 541.604 to stand for the proposition that “an
employee’s earnings can ‘be computed on . . . a daily . . . basis, without losing
the exemption or violating the salary basis requirement’—but only ‘if’ certain
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other conditions are met.” Ante, at __ (alterations in original). This strips
§ 541.604 of its key context. As explained in Part B(2) below, the regulations
are clear that the “employees” covered by § 541.604 are those in the
executive, administrative, and professional provisions set forth in
§§ 541.100, .200, and .300. The whole point of § 541.604 is to make clear
that those employees, when not covered by the HCE exemption, 9 can be paid
a minimum guarantee plus extras without losing their EAP exempt status.
These fundamental textual errors were not committed by two sister
circuits, whose decisions the majority unconvincingly tries to distinguish.
The majority claims that § 541.604 has no bearing on those other cases
because the employees’ base salaries in Litz and Anani were “calculated ‘on
a weekly, or less frequent basis,’” and Hewitt’s day rate was not. Ante, at __
(emphasis added) (quoting § 541.602(a)). This contrast deceptively
misstates the regulation: Section 541.602(a) requires only that the employee
“receive[] . . . on a weekly, or less frequent basis, a predetermined amount.”
(emphasis added). Hewitt received his biweekly salary just like the Litz and
Anani employees.
And contrary to the majority’s reasoning, Litz and Anani do not rest
on the computation method for base salaries. The majority’s argument
requires them to dismiss as “stray language” Anani’s two lengthy
paragraphs, the bulk of the court’s analysis, that explain why § 541.604 does
not apply to employees exempt under § 541.601. Ante, at __. In further
tension with the majority’s rationale, the employees in both Anani and Litz
were paid for “extra work” on an hourly basis. See Anani, 730 F.3d at 147;
Litz, 772 F.3d at 2. Given that under § 541.604(b), employee “earnings may
9
As explained in Part B(1)(a) below, the HCE exemption separately accounts for
minimum guarantees plus extras for employees it covers.
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be computed on an hourly, a daily or a shift basis,” the only reason to think
the employees in Anani and Litz would not fall within § 541.604(b) is exactly
the reason our sister circuits actually gave: They were exempt under the
HCE provision. 10 § 541.604(b) (emphasis added).
B. Section 541.604 Does Not Apply to the HCE Provision
Since a plain text reading of §§ 541.601 and .602 confirms that
Hewitt’s compensation satisfied the HCE exemption and the salary basis
test, the majority fall back on their real objection, that Hewitt’s compensation
fails to comply with § 541.604. But see Litz, 772. F.3d at 5 (“[W]e see no
reason why [§ 541.604’s] requirements should be grafted onto the materially
different exemption [§ 541.601] on which [the employer] relies.” (citing
Anani, 730 F.3d at 149). But the text, structure, and history of the pertinent
regulations belie the majority’s conclusion.
Textualism “is not always easy,” it “can be hard work and involve
significant research,” and it “is not glamourous,” but done properly it is both
“straightforward” and “fair.” Diarmuid O’Scannlain, “We Are All
10
The majority claims that the Sixth Circuit in Hughes shares its “textualist
approach” to the regulations. Ante, at __ (discussing Hughes v. Gulf Interstate Field Servs.
Inc., 878 F.3d 183 (6th Cir. 2017)). That is triply wrong. First, Hughes expressly declined
to rule on whether § 541.604(b) applied to an exempt employee under § 541.601, so it did
not adopt the majority’s construction. 878 F.3d at 190 (“[W]e need not decide today
whether [§ 541.604(b)] is the controlling source of evidence supporting our reading.”).
The majority selectively quotes Hughes’s description of the plaintiffs’ position in that case
to suggest otherwise. See id. at 189 (“Hughes and McDonald, however, point us to a
neighboring provision that might be helpful.” (emphasis added)). Second, the $337 day
rate in Hughes fell below the $455 minimum required by § 541.601, distinguishing it from
Hewitt’s $965 day rate that far exceeded the regulatory minimum. Id. at 186. Third, the
Hughes court noted how that employee differed from the HCE exempt employees in Litz
and Anani, “situations in which the textual requirements of 29 C.F.R. §§ 541.601,
541.602(a) are already clearly met.” Id. at 189 (citing Litz, 772 F.3d at 5; Anani, 730 F.3d
at 149).
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Textualists Now”: The Legacy of Justice Antonin Scalia, 91 ST. JOHN’S L. REV.
303, 312 (2017). Doing the hard work here refutes the view that § 541.601’s
exemption for highly compensated employees must be read in light of
§ 541.604.
First, the text and structure of § 541.601 indicate that § 541.604
should not be read into § 541.601. The text does so in two ways: It expressly
incorporates only § 541.602, and it provides separate rules for minimum
guarantees plus extras that either overlap or are in tension with § 541.604.
The majority, for instance, construes § 541.604 as safeguarding employees
by providing a minimum weekly guarantee as the “floor” on what an
employee must earn “regardless” of hours worked, and a “ceiling” on the
work required in exchange for a paycheck. 11 Ante, at __. But § 541.601
achieves a similar result with a different design: The minimum HCE total
annual compensation ($100,000) is more than four times the annualized
minimum weekly pay ($23,660). This HCE minimum thwarts unfair labor
exploitation at least as effectively as § 541.604’s minimum weekly guarantee
and reasonable relationship tests. The provisions therefore overlap. Further,
as will be seen, the “reasonable relationship” test found in § 541.604
conflicts with the “catch-up payment” provision of § 541.601.
Second, the broader regulatory structure confirms that the HCE
provision, § 541.601, stands apart from the general regulations covering the
EAP exemptions. See § 541.100 (Subpart B, executive employees);
§ 541.200 (Subpart C, administrative employees); § 541.300 (Subpart D,
11
Section 541.604(b) provides, “An exempt employee’s earnings may be
computed on an hourly, a daily or a shift basis, without losing the exemption or violating
the salary basis requirement, if the employment arrangement also includes a guarantee of
at least the minimum weekly required amount [$455] 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.”
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professional employees). Unlike the HCE provision, each of these
regulations has its own Subpart, and they all use similar language and follow
a nearly identical structure. In contrast, the HCE provision is located among
Subpart G’s “Salary Requirement” provisions. Critically, the Introductory
Statement to the EAP exemption regulations, § 541.0, explicitly states that
Subpart G (titled “Salary Requirement,” which contains § 541.604)
generally applies to these other Subparts, “including salary levels and the
salary basis test.” But the Introductory Statement separately states that
“Subpart G also contains a provision for exempting highly compensated
employees.” Id. The HCE exemption, in other words, lies within but does
not relate to all of Subpart G.
Third, the regulatory history confirms that § 541.602’s salary basis
test (expressly applied in § 541.601) is independent from § 541.604. The two
provisions were historically set together in one salary basis provision, but the
minimum guarantee plus extras portion (now found in § 541.604) was
excised from the salary basis test when the highly compensated employee
exemption was first promulgated in 2004.
1. The HCE Exemption’s Text and Structure
We conclude that § 541.604 does not apply to employees who are
exempt under § 541.601’s freestanding provision for highly compensated
employees. We reiterate that the text of § 541.601 makes no mention of
§ 541.604. Moreover, § 541.601 expressly incorporates only part of
§ 541.602’s salary basis test but expressly omits § 541.602(a)(3). The
specificity with which § 541.601 was drafted compels the conclusion that an
otherwise unidentified provision (§ 541.604) was not incorporated. Expressio
unius est exclusion alterius. See ANTONIN SCALIA & BRYAN GARNER,
READING LAW 107 (2012) [hereafter “Reading Law”].
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The majority attempts to explain § 541.601’s silence by observing that
the more general EAP provisions are similarly silent as to whether § 541.604
applies. Ante, at __. This is inaccurate, because as noted, the general EAP
exemption subparts incorporate Subpart G in its entirety, including the
“Salary Requirement,” precisely because those subparts cover employees
who earn as little as $23,660 annually ($455/week annualized). The HCE
exemption, however, overarches and supersedes the general EAP coverages
for employees who earn at least $100,000 annually. And because the HCE
exemption already stands within Subpart G, it need only reference the
express provisions of Subpart G (e.g. portions of § 541.602) that are
necessary to accomplish its purpose.
Reinforcing this structural indicator, § 541.604 deals with
compensation involving a minimum guarantee plus extras. Because the
general subparts governing EAP employees do not separately address the
situation of a minimum guarantee plus extras, and because those subparts
fully incorporate Subpart G, § 541.604 must apply to lesser-paid EAP
employees. But inasmuch as § 541.601 implements its own regime allowing
extras to count toward the $100,000 total annual compensation, there is no
need to advert to § 541.604. 12 See Anani, 730 F.3d at 149 (recognizing that
12
The distinction between the provision for highly compensated employees in
§ 541.601 and the general EAP subparts for executive, administrative employees is readily
apparent textually. The EAP subparts use nearly identical language and follow the same
structure. See § 541.100 (executive employees); § 541.200 (administrative employees);
§ 541.300 (professional employees). Not so for highly compensated employees, a category
that overarches the general provisions to the extent of its high minimum compensation and
different duties requirements. See § 541.601. In addition, the minimum salary set forth in
the executive, administrative, and professional provisions is made expressly “pursuant to
§ 541.600,” which is entitled “[a]mount of salary required,” and is fixed at $455 weekly
(or, as applicable, on a fee basis). See § 541.100(a)(1); § 541.200(a)(1); § 541.300(a)(1). But
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“every employee with a guaranteed weekly amount exceeding $455 who
earns over $100,000, and is therefore purportedly exempted by [] § 541.601,
also fits the description of having a ‘minimum guarantee plus extras’”).
Looked at in more detail, § 541.601’s rules for highly compensated
employees either overlap or are in tension with § 541.604. See Anani,
730 F.3d at 149 (recognizing that § 541.601 and § 541.604 “each deals with
different groups of employees who receive a ‘minimum guarantee plus
extras,’” and concluding the HCE exemption “is rendered essentially
meaningless” if the employee “would lose the ‘highly compensated
employee’ exemption by failing to qualify under [] § 541.604”); cf. United
Sav. Assn. of Tex. v. Timbers of Inwood Forest Assoc., Ltd., 484 U.S. 365, 371,
108 S. Ct. 626, 630 (1988) (“Statutory construction [] is a holistic
endeavor”); READING LAW at 180(“The provisions of a text should be
interpreted in a way that renders them compatible, not contradictory.”).
(a) The Provisions Overlap
Sections 541.601 and 541.604 tread similar ground. As its title
indicates, § 541.604 deals with situations where there is a “[m]inimum
§ 541.601 contains no mention of § 541.600 and only takes effect with total annual
compensation of $100,000.
The majority erroneously asserts that Hewitt must show he was paid on a salary
basis as defined by § 541.600(a). Ante, at __. This reading of § 541.600 into § 541.601,
however, results in conflict. Section 541.600 permits “[a]dministrative and professional
employees,” but not executive employees to be paid on a fee basis. But § 541.601 allows
administrative, professional, and executive employees to be compensated on a fee basis.
Compare § 541.600(a) (requiring executive, administrative or professional employees to
“be compensated on a salary basis,” but only permitting administrative and professional
employees to alternatively be paid “on a fee basis”) with § 541.601(a)–(b) (exempting any
employee performing “executive, administrative or professional” responsibilities so long
as total annual compensation includes a minimum portion “paid on a salary or fee basis as
set forth in §§ 541.602 and 541.605” (emphasis added)).
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guarantee plus extras.” Thus, § 541.604(a) allows “additional
compensation” above the minimum weekly-required amount paid on a salary
basis. An employer may “provide an exempt employee with additional
compensation without losing the exemption or violating the salary basis
requirement.” § 541.604(a). But § 541.601 independently deals with the
minimum guarantee plus extras scenario. In addition to incorporating the
§ 541.602 salary basis test, § 541.601(b)(1) states that, “[t]otal annual
compensation [$100,000 minimum] may also include commissions,
nondiscretionary bonuses and other nondiscretionary compensation earned
during a 52-week period.” To this extent, these provisions are parallel in
permitting extras.
But unlike § 541.604, the “other nondiscretionary compensation”
addressed in § 541.601(b)(1) need not bear a “reasonable relationship” to the
guaranteed weekly minimum salary. On the contrary, § 541.601(b)(2)
expressly permits a single lump sum payment at the end of the year to meet
the total annual compensation requirement. 13
The majority’s explanation that the reasonable relationship test sets a
“ceiling on how much the employee can expect to work in exchange for his
normal paycheck,” Ante, at __, only emphasizes why § 541.604 does not
apply to the HCE provision. No doubt § 541.604 was intended to protect
those employees to whom it applies from being overworked for their “normal
13
The fact that both provisions describe a scenario where the “extra” comes in the
form of sales commissions further supports the idea that they both address the same
minimum guarantee plus extras. Compare § 541.601(b)(2) (illustrating a base salary above
the minimum but below the required total annual compensation threshold where sales
commissions did not take the employee’s total compensation over the threshold, and
permitting an end-of-year payment to make up the difference) with § 541.604(a) (stating
that, “for example, an exempt employee guaranteed at least [$455] each week paid on a
salary basis may also receive additional compensation of a one percent commission on
sales”).
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paycheck.” But as already explained, § 541.601’s total annual compensation
requirement achieves a similar result with a different structural design. To
put it bluntly, a highly compensated employee who earns “total annual
compensation” of at least $100,000, supposing the salary basis test to have
been met, can hardly claim to be overworked. That § 541.601(a) requires a
very high level of compensation before it even applies protects significantly
against exploitation.
(b) Sections 541.601 and 541.604 are in Tension
Further illuminating the incompatibility between these provisions is
that § 541.601’s treatment of a minimum guarantee plus extras for highly
compensated employees authorizes an unreasonable relationship between
base and total compensation. Unlike § 541.604, the highly compensated
employee provision approves of large, unequal payments if they are necessary
to meet the high total annual compensation threshold. These payments can
take any form—hourly, daily, weekly, monthly, or an employer can even cut
a single check at the end of the year—if the employer provides a § 541.602-
compliant minimum base salary. Nor does § 541.601 concern itself with how
the minimum base salary is computed as long the employee “regularly
receives” each pay period the required “predetermined amount” under
§ 541.602’s salary basis test. What’s important is that the total annual
compensation threshold is satisfied.
To illustrate this point, an employer may satisfy the HCE provision by
paying a weekly amount of $455 (resulting an annual salary of only $23,660)
and make up the entire remainder at the end of the year to achieve total
annual compensation of $100,000. See § 541.601(b)(2). This permissible
catch-up payment of three times the base salary fails § 541.604’s reasonable
relationship test. But this result is permissible for highly compensated
employees for the same reason that the HCE exemption does not require “a
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detailed analysis” of their job duties: “A high level of compensation is a
strong indicator of an employee’s exempt status.” § 541.601(c).
Reading § 541.601 and § 541.604 together, as the majority does,
effectively eliminates the HCE exemption for a day-rate-paid executive
unless the executive also receives a weekly salary in line with the 541.604(b)’s
“reasonable relationship” test. The majority inadvertently proves this point
by asserting that Helix could have “easily complied with § 541.604(b)” by
offering a weekly salary of $4,000. Ante, at __. But the highly compensated
employee test requires only $455 be paid on a salary basis pursuant to
§ 541.602. Thus, grafting of § 541.604 onto § 541.601 rewrites the required
base salary and upends the balance struck by § 541.601 between the minimum
salary and total annual compensation.
Another illustration shows how significantly § 541.604 could rewrite
the base salary requirement in § 541.601. A Department of Labor opinion
letter suggests that the § 541.604 reasonable relationship test is satisfied if
the additional amounts do not exceed approximately 50% of the guaranteed
weekly minimum. 14 If it were applicable to § 541.601, this standard would
mean an employee whose total annual compensation equals the $100,000
HCE threshold must have a guaranteed “base salary” of $66,666.67 per year,
or $1,282.04 per week. To repeat, the HCE exemption, by its own terms,
requires a minimum $455 per week paid on a salary basis. The majority
ignores the text and rewrites the regulations.
14
The letter, interpreting § 541.604, not the HCE exemption, recognizes that a
“1.5-to-1 ratio of actual earnings” is not, under the regulations “the maximum permissible
ratio,” but recognizes the regulation “provide[s] a range of permissible ratios from 1.2-to-
1 to 1.5-to-1” and concludes a ratio of 1.8-to-1 “exceed[s] the permissible ratios found in
the regulations.” Dep’t of Labor, Opinion Letter FLSA2018-25, at *2 (Nov. 8, 2018).
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2. Broader Regulatory Structure
The post-2004 regulatory structure of the EAP exemptions further
reinforces § 541.604’s inapplicability to § 541.601. 29 C.F.R. Part 541
includes eight subparts (A–H). 15 Subpart A lays out the regulation in general
terms, while Subparts B–F address specific exemption categories. Executive,
administrative, and professional employees each have a subpart (found in B–
D, respectively). The exemption for highly compensated employees does not
have its own subpart but is included within Subpart G, titled “Salary
Requirement.”
This location proves important. Subpart A’s Introductory Statement
explains that “Subpart G contains regulations regarding salary requirements
applicable to most of the exemptions” and refers to Subparts B–D listed
above. Separately, it states that Subpart G “also contains a provision for
exempting certain highly compensated employees.” § 541.0(b). In other
words, the Introductory Statement recognizes that Subpart G (which
includes § 541.604) generally applies to each of the exemption categories
defined in the regulations other than the highly compensated employee
provision that is housed within Subpart G itself. See Anani, 730 F.3d at 150
(recognizing the significance of the fact that the highly compensated
employee “regulation is found in the ‘Salary Requirements’ Subpart rather
than in the ‘duties requirements’ Subparts, and there is direct evidence that
this placement was not the result of administrative inadvertence”). In short,
the highly compensated employee provision’s text and structure indicate the
HCE provision is sui generis.
15
Subpart H covers Definitions and Miscellaneous Provisions and is not relevant
for our purposes here.
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3. Regulatory History
The regulatory history confirms our conclusion. The minimum
guarantee plus extras provision used to be part and parcel of the salary basis
test. 16 At that time, the executive, administrative, and professional sections
each explicitly incorporated the salary basis test along with its minimum
guarantee plus extras subsection. 17 But in 2004, the Department of Labor
first promulgated the provision for highly compensated employees in
§ 541.601. The Department excised the minimum guarantee plus extras
subsection from the salary basis provision and, for the first time, transformed
that subsection into a new § 541.604. The timing is meaningful.
Contemporaneous with the creation of the regulatory exemption for highly
compensated employees came the decoupling of today’s § 541.604 from the
salary basis test. And of course, § 541.601 is explicit that it incorporates only
part of the § 541.602 salary basis test, while it fails altogether to mention the
then-equally-new § 541.604. Why spin off § 541.604 only to have courts
effectively re-incorporate it back sub silentio into the new highly compensated
employee exemption?
16
For example, in the 2002 version of the regulations, the salary basis test can be
found in § 541.118. Subpart (a) is the predecessor to today’s salary basis test now found in
§ 541.602. Subpart (b) is entitled “[m]inimum guarantee plus extras” and is the
predecessor to today’s § 541.604.
17
The pre-2004 regulations set out the full meaning of salary basis within the
broader section covering executive employees. § 541.118 (2002). The professional and
administrative sections then expressly incorporated the definition of salary basis as set forth
in § 541.118. See § 541.212 (2002) (“The explanation of the salary basis of payment made
in connection with the definition of ‘executive’ is also applicable in the definition of
‘administrative.’”); § 541.312 (2002) (“The salary basis of payment is explained in
§ 541.118 in connection with the definition of ‘executive.’”).
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C. Statutory Construction
The majority’s conclusion is also at odds with the statute itself, which
exempts employees based on duties not dollars. 18 The FLSA exempts “any
employee employed in a bona fide executive, administrative, or professional
capacity.” 29 U.S.C. § 213(a)(1). The plain meaning of this exemption
focuses on an employee’s duties, and it should be interpreted fairly. See
Encino Motorcars, L.L.C. v. Navarro, 138 S. Ct. 1134, 1142 (2018)
(emphasizing that courts “have no license to give the exemption[s] anything
but a fair reading”); READING LAW at 364 (disputing “[t]he false notion that
remedial statutes should be liberally construed”).
Two words, in particular, support this conclusion: “capacity” and
“bona fide.” The plain meaning of capacity is “[a]bility; capability;
possibility of being or of doing.” Capacity, WEBSTER’S NEW
INTERNATIONAL DICTIONARY (W. T. Harris & F. Sturges Allen eds., 1930).
And the word “bona fide” emphasizes that the “executive, administrative,
or professional capacity” must be “[i]n or with good faith; without fraud or
deceit; real or really; actual or actually; genuine or genuinely; as, he acted
bona fide; a bona fide transaction.” 19 Bona Fide, WEBSTER’S NEW
18
No one seriously disagrees that, based on the language in the statute itself, Hewitt
is precisely the kind of highly paid, supervisory employee the EAP exemption was meant
to exclude from overtime. See Faludi v. U.S. Shale Sols., L.L.C., 936 F.3d 215, 221 (5th Cir.
2019) (Ho, J., dissenting), withdrawn and reissued, 950 F.3d 269 (5th Cir. 2020) (concluding
under similar facts that “[i]f we were looking only at statutes enacted by Congress, I would
join my colleagues in affirming the district court, because it seems obvious that [the
employee] was ‘employed in a bona fide . . . professional capacity’ and therefore exempt
from the overtime requirements of the Fair Labor Standards Act.” (citing 29 U.S.C.
§ 213(a)(1) and ellipsis in original)).
19
The meaning of these terms in this context remains more or less the same in
modern usage. See, e.g., Capacity, OXFORD ENGLISH DICTIONARY ONLINE (2021)
(defining capacity as “[t]he power, ability, or faculty for anything in particular”); Bona
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INTERNATIONAL DICTIONARY (W. T. Harris & F. Sturges Allen eds., 1930);
accord Nevada v. U.S. Dep’t of Labor, 275 F. Supp. 3d 795, 804–05 (E.D. Tex.
2017) (relying on comparable dictionary definitions from 1933). Similarly,
the phrase “employee employed in a bona fide . . . capacity” emphasizes a
focus on the employee’s actual duties. 20
In the same vein, recent agency rulemaking recognizes that the EAP
exemption itself focuses on an employee’s duties, as distinguished from the
regulatory application of a salary test. See Defining and Delimiting the
Exemptions for Executive, Administrative, Professional, Outside Sales and
Computer Employees, 84 Fed. Reg. 51,230, 51,238 (Sept. 27, 2019) (codified at
29 C.F.R. 541) [hereinafter 2019 Final Rule] (recognizing that salary level is
generally “not a substitute for an analysis of an employee’s duties,” but is,
“at most, an indicator of those duties”). 21 In other words, the exemption is
Fide, OXFORD ENGLISH DICTIONARY ONLINE (2021) (defining the term to mean “[i]n
good faith, with sincerity; genuinely”).
20
Our cases have made a similar observation regarding the seaman exemption,
which applies to “any employee employed as a seaman.” 29 U.S.C. § 213(b)(6) (italics
added). See, e.g., Dole v. Petroleum Treaters, Inc., 876 F.2d 518, 523 (5th Cir. 1989)
(recognizing that the “italicized words mean something” and are not “mere tautology”;
instead they “warn us to look to what the employees do” rather than “rest on a matter of
a name, or the place of their work” (quoting Walling v. W.D. Haden Co., 153 F.2d 196, 199
(5th Cir. 1946)).
Consistent with that understanding, our cases frequently characterize the EAP
exemption as applying to those “working in” a bona fide executive, administrative or
professional capacity when describing the statute. See, e.g., Lott v. Howard Wilson Chrysler-
Plymouth, Inc., 203 F.3d 326, 331–33 (5th Cir. 2000) (recognizing the exemption applies to
employees “working in a bona fide executive, administrative or professional capacity”
(emphasis added)); Cowart v. Ingalls Shipbuilding, Inc., 213 F.3d 261, 266 (5th Cir. 2000)
(same); Faludi v. U.S. Shale Sols., L.L.C., 950 F.3d 269, 273 (5th Cir. 2020) (same).
21
See also 2019 Final Rule, 84 Fed. Reg. at 51,237 (“Salary is a helpful indicator of
the capacity in which an employee is employed, especially among lower-paid employees.
But it is not ‘capacity’ in and of itself.”); Defining and Delimiting the Exemptions for
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concerned with an employee’s actual duties as performed in the course of his
or her employment.
From its inception, the salary test’s purpose was to serve as a helpful
screen to filter out employees who are not actually employed in a bona fide
executive, administrative, or professional capacity. 22 In other words,
recognizing how fact-intensive a duties analysis can be, the salary test,
consisting of a salary level and salary basis component, provides a shortcut to
narrow the pool of employees whose duties merit a closer look.
Ultimately, the validity of the salary test turns on its effectiveness as a
filter for duties. The Department of Labor’s broad rulemaking authority
stops at the statute’s borders. Here, that means the regulations cannot
supplant the statutory exemption based on an employee’s duties with a
salary-based exemption. As the majority recognizes, Congress has declined
to exempt employees based on their pay. Ante, at __. True enough.
Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed. Reg.
22,122, 22,165 (Apr. 23, 2004) (codified at 29 C.F.R. 541) (“The salary level test is
intended to help distinguish bona fide executive, administrative, and professional
employees from those who were not intended by the Congress to come within these exempt
categories.”).
22
See Harry Kantor, Report and Recommendations on Proposed Revisions of
Regulations, Part 541, at 2–3 (1958) (“Essentially, the salary tests are guides to assist in
distinguishing bona fide executive, administrative, and professional employees from those
who were not intended by the Congress to come within these categories.”); Harry Weiss,
Report and Recommendations on Proposed Revisions of Regulations, Part 541, at 8 (1949)
[hereinafter “Weiss Report”] (“[T]he best single test of the employer’s good faith in
attributing importance to the employee’s services is the amount he pays for them.”);
Harold Stein, Report and Recommendations of the Presiding Officer at Public Hearings on
Proposed Revisions of Regulations, Part 541, at 42 (1940) [hereinafter “Stein Report”] (“The
salary paid the employee is the best single test of the employer’s good faith in characterizing
the employment as of a professional nature.”).
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Congress elected to exempt employees based on the capacity in which they
are employed. It’s their duties and not their dollars that really matter.
And the Department of Labor recognizes this limitation. For
example, in 2016 the agency promulgated a rule substantially increasing the
salary level required to qualify as an exempt employee. Defining and
Delimiting the Exemptions for Executive, Administrative, Professional, Outside
Sales and Computer Employees, 81 Fed. Reg. 32,391 (May 23, 2016) (setting
“the standard salary level for exempt EAP employees at the 40th percentile
of weekly earnings of full-time salaried workers in the lowest-wage Census
Region”). This change had the effect of excluding from the exemption
4.2 million employees who were in fact employed in a bona fide executive,
administrative and professional capacity and who would otherwise have been
exempt. See 2019 Final Rule, 84 Fed. Reg. at 51,238; Nevada, 275 F. Supp.
3d at 806 (indicating the rule “more than doubles the Department’s previous
minimum salary level”). A district court enjoined the rule because it made
“overtime status depend predominately on a minimum salary level, thereby
supplanting an analysis of an employee’s job duties.” Nevada,
275 F. Supp. 3d at 806. The district court concluded that a minimum salary
level is permissible to the extent it “serves as a defining characteristic when
determining who, in good faith, performs actual executive, administrative, or
professional capacity duties.” Id. at 806. The Department of Labor
accordingly withdrew the rule and promulgated a new rule in 2019. In the
new rule, it discussed the district court decision, recognized “the 2016 final
rule was in tension with the Act,” and emphasized that a “salary level set
that high does not further the purpose of the Act, and is inconsistent with the
salary level test’s useful, but limited, role in defining the EAP exemption.”
2019 Final Rule, 84 Fed. Reg. at 51,238.
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In sum, every salary test does not necessarily pass statutory muster. 23
But whether the salary basis component of the test (found in § 541.602) is
invalid is not the question before this court. 24 Cf. Auer v. Robbins, 519 U.S.
452, 457, 117 S. Ct. 905, 909 (1997) (upholding an agency interpretation of
salary basis while recognizing that the respondents “do not raise any general
challenge to the Secretary’s reliance on the salary-basis test”). The question
before us is whether § 541.604 should apply to day rate employees who are
otherwise obviously exempt under § 541.601’s highly compensated
employee provision. Today’s holding that day rate toolpushers like Hewitt,
who are “in charge of entire departments of oil drilling professionals,” are
not actually exempt stands in obvious tension with the statute’s focus on an
employee’s duties, 25 as well as the “limited” role of the salary test in
23
With respect to the salary level component of the test, a panel of this court has
concluded that it can fall within the bounds of the statutory text when appropriately set.
Compare Wirtz v. Miss. Publishers Corp., 364 F.2d 603, 608 (5th Cir. 1966) (rejecting the
argument that “the minimum salary requirement is not a justifiable regulation under
Section 13(a)(1) of the Act,” and concluding the then-applicable salary threshold was not
“arbitrary or capricious”), with Nevada, 275 F. Supp. 3d at 806 (recognizing that Wirtz
approved of a salary level test for “identifying categories of employees Congress intended
to exempt,” but concluding the revised threshold exceeded the scope of the statute (citing
Wirtz, 364 F.2d at 608) (italics in original)).
24
It’s worth noting that the salary level portion of the test seems to have the
strongest support as a screen for duties in the regulatory history. See, e.g., Weiss Report at
8 (“[T]he best single test of the employer’s good faith in attributing importance to the
employee’s services is the amount he pays for them.”); Stein Report at 42 (similar).
Justifications for the salary basis component of the test have historically focused on its
factual correlation to executive, administrative, and professional employees. See, e.g.,
Weiss Report at 24 (recognizing that “[t]he evidence at the hearing showed clearly that
bona fide executive, administrative, and professional employees are almost universally paid
on a salary or fee basis”). Whether this correlation is true today remains an open question.
25
The holding today has implications beyond the toolpushers at issue in this case,
potentially questioning the exempt statuses of other executive, administrative, and
professional day rate employees commonly found in industries like oil and gas.
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illuminating those duties. The path that is more faithful to the statute is to
construe § 541.601 as precluding § 541.604’s application to employees who
fall within the HCE provision. 26 Cf. READING LAW at 63 (“A textually
permissible interpretation that furthers rather than obstructs the document’s
purpose should be favored.”).
III. CONCLUSION
The majority misreads 29 C.F.R. § 541.601 and other regulations
governing when highly compensated employees qualify for the FLSA’s EAP
exemption. In doing so, our court turns a blind eye to such employees’ duties
and construes the regulations in a way that is unmoored from the regulatory
text. I respectfully dissent.
26
There is nothing “purposivist” about reading a regulation within the context of
its originating statute. See ante, at __. The text of the FLSA includes an EAP exemption,
which is “as much a part of the FLSA’s purpose as the overtime-pay requirement.”
Encino, 138 S. Ct. at 1142. The regulations, if possible, should be read in harmony with that
text.
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Wiener, Circuit Judge, joined by Owen, Chief Judge, and Jones,
Dennis, and Elrod, Circuit Judges, dissenting:
I concur in Judge Jones’s thorough dissent. But, as the panel dissenter
and one of today’s en banc dissenters, I write separately—and at times
repetitively—to emphasize how common sense and a reasonable reading of
the law combine to demand a result opposite the one reached originally by
the panel majority and today by the en banc majority. Frankly, I cannot
fathom how a majority of the active judges of this court can vote to require
Helix to pay overtime to Hewitt, the supervisor of 12 to 13 hourly, hands-on
workers, when he was already paid more than twice the cap of $100,000 per
annum for overtime eligibility. And, if that is not incomprehensible enough,
keep in mind that Hewitt worked for Helix no more than half of the days during
the calendar years at issue!
After the Fair Labor Standards Act (“FLSA”) limits time-and-one-
half overtime pay to only those workers who are compensated hourly for
more than forty hours of work per week, the regulations—starting with
§ 541.601 (“§ 601”)—proceed to cap the entitlement to overtime to those
employees whose earnings are deemed to be too high to entitle them to it.
Section 601 addresses the most common exclusion: employees whose salaries
alone exceed the specified maximum. (The salary cap for overtime was
$100,000 per annum for the calendar years at issue here.)
Then, in recognition that there is a subset of workers whose annual
wages alone total less than the amount needed to disqualify them from
overtime but who nevertheless earn more than that amount when combined
with “extras,” the exclusionary net’s mesh is made finer by the addition of
§ 541.604 (“§ 604”). It covers that sub-class of workers whose annual wages
alone do not exceed § 601’s cap for overtime eligibility but whose “wages-
plus-extras” do exceed that cap.
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Hewitt is excluded from overtime by § 601 for his high salary alone,
so we should both start and stop there, never reaching § 604. Today’s
majority’s failing to stop at § 601 but proceeding to § 604 misses the
regulations’ forest for its trees. The majority focuses on one snippet of
regulatory text, ignoring the location of that text within the context of the
FLSA and the regulations as a whole.
Common sense and congressional intent should end our inquiry into
whether Hewitt—a very highly paid, clean-hands supervisor—is entitled to
overtime. Overtime is intended exclusively for front-line, hands-on laborers
who earn less than one-fourth of Hewitt’s annualized salary and less than half
of the salary he actually earned by working for Helix 28 days “on” and 28
days “off”—no more than half of each calendar year.
By working only 28 days on and 28 days off, Hewitt could not have
worked for Helix more than 183 or 184 days out of each 365-day year. Yet, for
the half-calendar years at issue here, Helix paid Hewitt in excess of $200,000
per annum, more than twice the regulatory cap of $100,000 per full calendar
year required by § 601 to be considered a highly-compensated, executive
employee and thus not eligible for overtime. 1
As noted above, § 601 only deals with highly paid employees like
Hewitt. Since others are paid less than the regulations consider to be an
overtime-exempt “salary” but earn more than that through a combination of
a minimum guaranteed wage plus extras, the Act catches them in § 604’s finer
net. But that finer net is never needed, and thus should never be considered,
when an employee’s salary alone exceeds § 601’s cap, as did Hewitt’s in the
extreme.
1
See id. § 541.601(a)(1). The regulatory cap is now $107,432.
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The FLSA and its regulations have always drawn a distinction
between (1) blue collar laborers, who are entitled to overtime, and (2) white
collar professionals and supervisors, who from the outset have been excluded
from overtime. Hewitt is a member of the latter group. He is a “Tool
Pusher,” an old Oil Patch term of forgotten origin that does not involve any
pushing of a tool. Rather, it has always designated supervisory employees who
perform non-manual work, directing “Roughnecks,” another ancient Oil
Patch term for the hands-on laborers who do the manual work on oil rigs.
Tool pusher Hewitt is not a “carpenter, mechanic, plumber, iron worker,
craftsman, operating engineer, longshoreman, construction worker,” or
other manual laborer—such as a roughneck—“who perform work involving
repetitive operations with their hands.” 2 Hewitt never got his hands dirty—
only the twelve or thirteen roughnecks whom he supervised dirtied theirs.
Hewitt is indisputably the type of supervisory or executive employee
that has always been excluded from overtime. Ever since 1944, when the
FLSA (and, since 2004, the Department of Labor (“DOL”)) exempted
highly compensated, executive employees from overtime, 3 neither the
Supreme Court nor any federal Court of Appeals 4 has ever held that a
supervisor like Hewitt—who, as stated above, made more than twice the
2
29 C.F.R. § 541.601(d).
3
The FLSA has never made a distinction between high-salaried and low-salaried
executive supervisors. Compare 29 U.S.C. § 213(a)(1) (1944) (no salary level), with id.
§ 213(a)(1) (same) (2018). As I explain below, the FLSA’s omission of a wage cap was
intentional.
4
Cf. Hughes v. Gulf Interstate Field Servs., Inc., 878 F.3d 183, 185 (6th Cir. 2017)
(concluding that welding inspectors—who are not supervisors like Hewitt was—are not
exempt from overtime); Coates v. Dassault Falcon Jet Corp., 961 F.3d 1039, 1041 (8th Cir.
2020) (same for team leaders and production liaisons). The Coates court did not once
conclude that either of the employment positions it analyzed were supervisory positions.
See Coates, 961 F.3d at 1041–48.
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regulatory cap of entitlement to overtime by working for Helix no more than
half the days in a year—was anything but not entitled to overtime. Until
today, that is!
I imagine that the original proponents of the FLSA—including
President Franklin D. Roosevelt, 5 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. It was—
and still is—meant to (1) protect the average, non-supervisory, frequently
underpaid and overworked, blue-collar common laborer, and (2) influence
employers to hire more 40-hour-per-week manual laborers (but not more
supervisors, despite the majority’s unsupported decision to include them).
5
President Roosevelt issued a statement opposing salary-level amendments to the
proposed Act but supported a blanket exemption for, among others, “executive”
employees. See FDR/OF 3295, Wage & Hour Division, Box 1, 1940 folder, Apr. 25, 1940
(rejecting the Barden Bill, which “would exempt all employees, including manual workers,
receiving a guaranteed monthly salary of $150 or more,” Letter of Frances Perkins to
President Roosevelt (Apr. 16, 1940) (FDR/OF 3295, Wage & Hour Division, DOL, Box 1,
1940 folder)).
Harold Stein, Presiding Officer of the Wage and Hour Division hearings, under
whose influence, research, and guidance the FLSA was enacted, found that “[t]here was
. . . surprisingly wide agreement that a salary qualification” is an “index to the ‘bona fide’
. . . executive character [of employment]. . . . The basis of this agreement is easily explained.
The term ‘executive’ implies a certain prestige, status, and importance.” If these
executives are denied overtime pay, “[i]t must be assumed that they enjoy compensatory
privileges and this assumption will clearly fail if they are not paid a salary substantially
higher” than the minimum wage. “[T]he best single test of the employer’s good faith in
attributing importance to the employee’s services is the amount he pays for them.” United States
Department of Labor, Wage and Hour Division, “Executive, Administrative, Professional
. . . Outside Salesman Redefined,” Report and Recommendation of the Presiding Officer
at Hearings Preliminary to Redefinition, Effective Oct. 24, 1940, at 19 (emphasis added)
[hereinafter Stein Report].
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In an effort to support their unprecedented decision, today’s majority
cites the official rulemaking of the 2004 version of § 601 and notes the failed
efforts of Congress during the 1940s “to exempt all highly paid employees.” 6
But the reason that the FLSA did not then contain a salary cap for exempting
highly paid white-collar employees is because it did not need such a cap! It
already denied overtime to all white-collar employees. 7 In fact, Presiding
Officer Stein noted in his report and recommendation (which influenced
Congress to adopt the FLSA in 1944) that “the terms ‘executive,’
‘administrative,’ and ‘professional’ . . . in and of themselves should be
construed and were meant by Congress to exclude from the benefits of the
[A]ct all white collar workers.” 8 Those workers were, “generally speaking,
all employees except laborers, machine operators and tenders, craftsmen,
and maintenance workers.” 9
So, while it is true that the FLSA did not originally include a salary
cap, it did make a distinction between (1) “executive[s]” 10 like Hewitt, who
were considered “bosses” 11 and thus not entitled to overtime, and (2) non-
6
See ante at 2 (quoting 69 Fed. Reg. 22,122-01 (2004)).
7
See 29 U.S.C. §§ 201–19 (1944); see also Deborah C. Malamud, Engineering The
Middle Classes: Class Line-Drawing in New Deal Hours Legislation, 96 MICH. L. REV. 2212,
2220 & n.29 (1998) (discussing the “executive, administrative, [and] professional”
exemption in the originally enacted FLSA and noting that, although the Act included no
exemptions to minimum wage provisions for upper-level employees, the Act was devoid of
any salary requirement—exemptions “which are still in effect and are still the subject of
controversy”).
8
Stein Report, at 6.
9
Id.
10
29 U.S.C. § 213(a)(1).
11
Stein Report, at 4 (Presiding Officer Stein explaining that “executive applies with
particular aptness to persons who are commonly called ‘bosses’”); see also Malamud, supra
note 7, at 2306.
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administrative, non-professional, blue-collar workers—like the roughnecks
Hewitt supervised—who were entitled to overtime, regardless of how much
they were paid. 12 It is on this ground that the Supreme Court cases and ours,
which note in dictum that overtime is available even for highly-paid blue-
collar workers, must be distinguished from today’s case. Those cases
analyzed only blue-collar workers, i.e., manual laborers. They did not analyze
the FLSA, or even the regulations, as applied to “bosses.” 13 Neither did the
Hughes or Coates cases—which the majority relies on for its questionably self-
labeled “textualist” position—discuss the regulations as applied to
supervisors. 14 That’s one reason why it’s so bewildering to me for today’s
majority to insist that Hewitt is eligible for overtime. Supervisors like Hewitt
have never been eligible for overtime.
Even more than do common sense and clear congressional intent, the
text of the regulations confirms that today’s majority is simply wrong. The
majority views § 604(b) as an exception to the salary basis test of § 602(a),
which is incorporated into § 601 and is thus applicable to all employees who
fall under that subsection. In contrast, from its title through its entire text,
§ 604 covers only that sub-set of employees who are paid a “[m]inimum
12
See Jewell Ridge Coal Corp. v. Local No. 6167, 325 U.S. 161, 162, 167 (1945) (noting
that underground mine workers “are not deprived of the benefits of the [Act] simply
because they are well paid”).
13
Compare Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 730 (1981)
(truckdrivers), and Jewell Ridge Coal Corp., 325 U.S. at 162 (underground mine workers),
and Parrish v. Premier Directional Drilling, 917 F.3d 369, 375, 388 (5th Cir. 2019)
(directional-driller consultants and measurement-while-drilling consultants, both non-
managerial, independent contractor positions), with ante at 2 (noting dictum from each case
and misapplying it to a highly-compensated supervisor).
14
See Hughes, 878 F.3d at 185 (welding inspectors); Coates, 961 F.3d at 1041 (team
leaders and production liaisons).
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guarantee plus extras.” 15 Section 604 is clearly not applicable to Hewitt,
whose salary alone exempted him from overtime and who made no extras! 16
Hewitt earned a flat salary of $963 per day for each and every day
during which he performed any work at all for Helix, whether fifteen minutes
or fifteen hours! And he was paid by-weekly, i.e., “on a weekly, or less
frequent basis.” 17 Furthermore, § 601—under which Hewitt clearly does
fall—already contemplates § 604’s “[m]inimum guarantee[s] plus extras.” 18
As the Second Circuit stated:
The reading that gives full meaning to both C.F.R. § 541.601
and C.F.R. § 541.604 is that each deals with different groups of
employees who receive a ‘minimum guarantee plus extras.’
The first exemption deals with those employees who earn over
15
Id. § 541.604 (emphasis added).
16
True, every day Hewitt worked beyond one day per week could be labelled an
“extra.” But additional days worked are not the sort of “extras” that § 604 contemplates.
That regulation contemplates, for example, commissions, “flat sum[s], bonus payment[s],
and straight-time hourly amount[s],” see id. § 541.604(a), and additional guarantees on top
of daily rates, see id. § 541.604(b). Hewitt made none of those.
17
Id. § 541.602(a).
18
See id. § 541.601(b)(1) (stating that “[t]otal annual compensation may also
include commissions, nondiscretionary bonuses, and other nondiscretionary compensation
earned during a 52-week period”); accord Anani v. CVS RX Servs., Inc., 730 F.3d 146, 149
(2d Cir. 2013) (“We perceive no cogent reason why the requirements of C.F.R. § 541.604
must be met by an employee meeting the requirements of C.F.R. § 541.601. Indeed, C.F.R.
§ 541.601 is rendered essentially meaningless if a ‘highly compensated employee’ must also
qualify for the exemption under C.F.R. § 541.604 or, to state the converse, would lose the
‘highly compensated employee’ exemption by failing to qualify under C.F.R. § 541.604. To
be sure, C.F.R. § 541.604 deals with employees who earn the ‘[m]inimum guarantee plus
extras,’ but every employee with a guaranteed weekly amount exceeding $455 who earns
over $100,000 [annually], and is therefore purportedly exempted by C.F.R. § 541.601, also
fits the description of having a ‘minimum guarantee plus extras.’ Appellant’s
interpretation thus renders C.F.R. § 541.601 superfluous.”); Litz v. Saint Consulting Grp.,
Inc., 772 F.3d 1, 5 (1st Cir. 2014) (adopting the Anani court’s analysis of the two
regulations).
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$100,000 annually while the second exemption deals with
employees whose guarantee with extras totals less than
$100,000 annually. 19
The example included in § 604(b) reinforces the propriety of the Second
Circuit’s analysis. It shows exactly why that regulation deals with a different
sub-set of employees than those who—like Hewitt—are expressly covered
by § 601.
Hewitt’s minimum guarantee of $963 per day was more than twice the
maximum of those who qualify by not only making a low salary but also
“extras.” And, again, Hewitt made no “extras”! Thus, § 604(b) is facially
inapplicable to Hewitt. Indeed, it is a dead letter to employees who, like
Hewitt, (1) already make more than §§ 601 and 602(a)’s salary-basis cap and
(2) make no “extras” of the kind covered by § 604.
The majority nevertheless posits that § 604(b) is an “exception” or
“proviso” to the salary basis test. 20 But that position is internally
inconsistent. If § 604(b) were an “exception” to the salary basis test for all
daily rate employees (no matter how highly paid), why would the Secretary
not have included in § 604(b) other important language from the salary basis
test of § 602(a), such as the requirements that (1) “the employee regularly
receive each pay period on a weekly, or less frequent basis” and (2) the
amount be “predetermined” and “not subject to reduction”? 21 Should we
assume that the other requirements of § 602(a)’s salary basis test simply do
not apply to daily rate, bi-weekly paid employees like Hewitt, so long as they
also meet § 604(b)’s salary-plus-extras requirements?
19
Anani, 730 F.3d at 149 (emphasis added).
20
Ante at 6.
21
29 C.F.R. § 541.602(a).
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That simply cannot be. If it could, a daily rate employee’s “minimum
guarantee” (1) could be subject to reduction, (2) could not be predetermined,
and (3) could be disbursed daily rather than “weekly, or less frequent[ly].”
And, the majority’s “common sense” arguments that (1) “we typically
associate the concept of ‘salary’ with . . . stability and security” 22 and
(2) § 604(b) allows an employee to anticipate what he will earn, 23 would
crumble. Yet the majority’s analysis leads directly to such untenable results,
without any explanation or textual support whatsoever.
Neither can § 604(b) be a “proviso” to the salary basis test. According
to the majority’s own reasoning, a daily rate cannot be received “on a weekly,
or less frequent basis,” and cannot be received “without regard to the
number of days or hours worked.” But these are two requirements of the
salary basis test. 24 Therefore, according to the majority’s reasoning, § 604(b)
must be an exception to the salary basis test’s requirements, not a “proviso.”
According to the majority, meeting that test’s requirements on its own terms
is simply impossible. As stated in the preceding paragraph, if § 604(b) were
an exception to a daily-rate employee’s meeting the salary basis test’s
requirements, then that salary could (1) be subject to reduction, (2) not be
predetermined, and (3) be disbursed daily rather than “weekly or less
frequently.” The majority’s position on this point is simply untenable.
The First and Second Circuits have already recognized that there is
an easy and logical way to read § 601 and § 604(b) in harmony: Each section
applies to an entirely different subset of employees! 25 Hewitt was clearly a
22
See ante at 3
23
See id. at 8.
24
See 29 C.F.R. § 541.602(a), (a)(1).
25
See supra note 18.
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member of the § 601 subset (he was paid in excess of $100,000 per annum).
He was just as clearly not a member of the § 604 subset (he earned too much
and he received no extras).
In stark contrast to those other circuits’ indisputably correct analyses,
the way that today’s majority proposes to harmonize § 601 and § 604(b)
simply will not work. It applies rules to oranges that are intended for apples! The
majority focuses on an isolated phrase in one subsection of § 604 and applies
it not only to hourly rate workers but to all daily rate employees too,
regardless of (1) how much money they are paid, (2) whether or not they
receive “extras,” and (3) whether they are supervisory employees or manual
laborers.
Most importantly, perhaps, the majority’s new overtime test for
highly compensated, daily rate, executive employees is entirely detached
from the reality of our time. Back in the 1940s, when the FLSA was enacted,
exemptions were based on “class” lines. 26 Hourly rate, blue collar laborers
were considered to be low class, while daily, weekly, and monthly rate, white
collar employees were considered high class. 27 In fact, Presiding Officer Stein
explicitly noted that daily rate workers like Hewitt could qualify as salary
based. He stated in his report and recommendation that “[a]nother type of
situation in which the [salary basis] requirement will be met is that of an
employee paid on a daily or shift basis, if the employment arrangement
26
See generally Malamud, supra note 7.
27
See id. at 2288 (noting President Roosevelt’s Secretary of Labor Frances
Perkins’s understanding “that the division between ‘hourly’ versus ‘salaried’ workers was
not merely random—that there was a tradition of paying factory workers of all skill levels
on an hourly rate and office, supervisory, and professional staff regardless of duties on a
salaried basis”).
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includes a provision that he will receive not less than the amount specified in
the regulations in any week in which he performs any work.” 28
Today—almost eighty years later—class lines have been abandoned.
Today, paying daily rates to supervisory, executive employees (including
those working in the mineral exploration, discovery, and production
industry) is not only common: It is a necessary method of calculating
compensation. Amici helpfully point out that daily rates for tool pushers
“reflect the historic economic balance the industry must maintain given the
highly unpredictable nature of oil patch work.” The Supreme Court has
“counsel[ed]” us “in favor of a functional, rather than a formal, inquiry, one
that views an employee’s responsibilities in the context of the particular
industry in which the employee works.” 29
Yet today’s majority ignores the Supreme Court’s guidance in favor
of an antiquated view of what is a “salary,” stating that a daily-rate-only
method of payment can never be considered a salary. 30 If that holding is
allowed to stand, the “oyl biddness,” a vital industry in our region and one
which provides more than 400,000 direct jobs, will suffer needlessly and
excessively.
In sum, both the purpose and the text of the FLSA and its regulations
demand a result opposite the one reached by both the panel majority and
today’s en banc majority. Those majorities proudly and repeatedly call
themselves “textualist” for reaching that result. But—as I believe I have
28
Stein Report, at 26.
29
Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 161 (2012) (emphasis
added).
30
See ante at 3 (“By contrast, we do not ordinarily think of daily or hourly wage
earners . . . as ‘salaried’ employees.”); id. at 4 (requiring a minimum guarantee in addition
to a daily rate for a daily rate employee’s earnings arrangement to be considered a salary).
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shown—the correct reading of the applicable texts demands the opposite
outcome. And, by engaging in only its skewed version of textualism while
ignoring or misapplying the history of the exemptions, the majority’s holding
contravenes common sense and provides a detailed but ultimately
unnecessary and misguided discussion. 31
We should be very dubious whenever the regulatory text is interpreted
in isolation to reach an illogical and unexpected result. This is just such a
case.
I respectfully dissent.
31
I suspect that one of the majority’s responses to my “common sense” approach
will be that it is common sense that workers would rather spend some time at home with
loved ones rather than at work. See ante at 26 (“Millions of Americans prefer more free
time over more money.”). While true in the abstract, this response ignores the fact that
exemptions to the FLSA’s overtime requirements exist in the first place. Do most
employees enjoy their free time? Yes, but not all employees are entitled to overtime pay
just because they enjoy their free time.
63