U.S. Supreme Court's Kavanaugh says overtime pay rules may be invalid

U.S. Supreme Court Associate Justice Brett M. Kavanaugh poses during a group portrait at the Supreme Court in Washington, U.S., October 7, 2022. REUTERS/Evelyn Hockstein
  • Challenge to overtime pay exemptions would be "strong," justice says
  • Case involves oil rig worker who earned $200,000 a year
  • Appeal does not challenge rules, only the way they are applied

(Reuters) - U.S. Supreme Court Justice Brett Kavanaugh on Wednesday seemed to invite a legal challenge to World War II-era regulations exempting certain workers from overtime pay, in a case involving an oil rig supervisor who was paid a daily rate but earned more than $200,000 a year.

Kavanaugh, a member of the court's conservative wing, said during oral arguments that the U.S. Department of Labor regulations appeared to be inconsistent with the law they are supposed to implement, the Fair Labor Standards Act (FLSA).

The case brought by oil and gas services company Helix Energy Solutions Group Inc challenges the way the overtime regulations are applied but not their overall validity.

"If the statutory argument is not here, I'm sure someone is going to raise it because it's strong," Kavanaugh said.

Helix is appealing a 5th U.S. Circuit Court of Appeals decision that said a former supervisor, Michael Hewitt, was entitled to overtime pay because he was paid a daily rate and not a regular salary while working 84 hours a week.

In an amicus brief backing Helix, the American Petroleum Institute and other trade groups said daily rates are common in the oil and gas industry, and ruling for Hewitt would open companies up to a flood of class action lawsuits.

The FLSA says workers with "executive, administrative and professional" duties are exempt from mandatory overtime pay. A 1940 regulation says highly compensated workers - currently defined as those earning $107,000 a year or more - are presumably exempt as long as they are paid at least $455 per week in the form of a salary.

A separate rule says that the exemption can apply when workers are paid a daily rate, as long as they are guaranteed $455 per week "paid on a salary basis."

Paul Clement of Clement & Murphy, who represents Helix, argued on Wednesday that because Hewitt was paid a daily rate of $963 and was guaranteed at least that much pay in any week where he worked, and he earned more than $200,000 a year, he met the conditions of the highly compensated worker exemption and the second rule did not apply at all.

Hewitt's lawyer, Ed Sullivan of Oberti Sullivan, countered that the rule involving daily pay rates applied because Hewitt was never paid a salary. And because he was not guaranteed $455 a week in salary, he was not exempt under the FLSA, Sullivan said.

The court's liberal justices seemed to agree. Justice Ketanji Brown Jackson said the purpose of the regulations was to ensure that workers receive predictable payments, regardless of how much they earn.

The conservative justices sounded more skeptical of Sullivan's claims, suggesting that the rules were incompatible with each other and were not meant to be applied in tandem.

Kavanaugh went further, telling Clement that he believed the two regulations may be invalid because of the various conditions they place on the broad exemption included in the FLSA.

Clement, in response to a question from Kavanaugh, said he was not aware of any pending cases challenging the regulations but "you just asked about it, so somebody definitely will raise it now."

The case is Helix Energy Solutions Group Inc. v. Hewitt, U.S. Supreme Court, No. 21-984.

For Helix: Paul Clement of Clement & Murphy

For Hewitt: Samuel Kaplan of Boies Schiller Flexner and Ed Sullivan of Oberti Sullivan

For the government: Anthony Yang of the U.S. Solicitor General's office

Read more:

Daily paid oil rig worker not salaried per FLSA, owed OT – 5th Circuit

5th Circuit sharply divides in finding supervisor deserves overtime

U.S. Supreme Court to decide when highly paid workers deserve overtime pay

U.S. Labor Department extends overtime pay to 1.3 million U.S. workers

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Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at daniel.wiessner@thomsonreuters.com.