Federal judge rules daily rate can be salary for FLSA exemptions
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- In Scott v. Antero Resources Corp., the United States District Court for the District of Colorado ruled on May 20, 2021 that an employee’s “per diem rate” could be considered a payment based on salary and therefore qualified for the exemption from the Fair Labor Standards Act.
- On May 25, 2021, the United States Court of Appeals for the Fifth Circuit heard in bench oral argument in Hewitt v. Helix Energy Solutions Group, Inc., a case that examines whether a “day rate” meets the wage base test for overtime exemptions.
In an important and favorable decision for employers, especially in the oil and gas industry, a federal judge in the United States District Court for the District of Colorado recently ruled that the plaintiff in Scott v. Antero Resources Corp., a highly paid employee, was exempt from overtime because the basic salary requirement was met.1
Understanding daily rates
The historically common practice of paying workers in certain industries (such as oil and gas services) a “per diem rate” for each day worked has been the subject of significant overtime litigation for several years now. This is because the most common overtime exemptions under the Fair Labor Standards Act (FLSA) require the employee to be paid on a “salary basis” of at least a certain minimum amount. And, according to the argument, a “daily rate” cannot be a “salary”.
But many jobs in the oilfield – such as a well site manager / contractor, directional driller and tool pusher – regularly pay “daily rates” approaching or exceeding $ 1,000 per day, making hundreds of dollars. thousands of dollars a year. These workers can earn twice as much in a single day as the weekly minimum required for an FLSA exemption. These highly paid workers are effectively “guaranteed” a certain minimum amount each week because any time worked is paid at least one day, and the pay only increases from there.
The court in Scott v. Antero Resources Corp. applied a common sense approach and found that a sufficiently high per diem rate may meet the salary base test. The decision in Scott points out that some courts will not apply the base salary test in a blindly technical way to grant overtime deals.
Fifth circuit to make a final decision on daily rates
This has been an important issue and the subject of much litigation, particularly in the Fifth Circuit states of Texas, Louisiana and Mississippi, where courts have wrestled with how to deal with overtime claims by “daily rate” employees who nonetheless earn hundreds of thousands of dollars. annually. Indeed, as the district court of Scott pointed out, the United States Court of Appeals for the Fifth Circuit itself has ruled and reversed the course on several occasions, leaving the case law in disarray.
First, the fifth circuit in Faludi v. US Shale Solutions, LLC, concluded that a sufficiently high daily rate could constitute “salary” under the FLSA base salary test. In Faludi, an employee who received a “per diem rate” of more than $ 1,000 per day (more than the weekly minimum required by the FLSA) was not entitled to overtime.2 However, the Fifth Circuit subsequently withdrew its initial notice in Faludi, and ruled that the worker was an independent contractor who was not entitled to overtime, whether or not he was paid the day rate. Although the Fifth Circuit withdrew its initial advice in Faludi, the Court of Scott found the original Faludi opinion “very convincing and applicable to the facts of this case”.3
Then, on April 20, 2020, the Fifth Circuit, at Hewitt v. Helix Energy Solutions Group, Inc., concluded that a “day rate” did not meet the wage base test for overtime exemptions.4 However, on March 9, 2021, the Fifth Circuit granted the employer’s request for a new hearing. in bench, and overturned the decision of April 20, 2020. The Fifth Circuit heard oral argument on May 25, 2021 and the parties, the bar and the employers are awaiting a final decision from the Fifth Circuit.
The state of the law on this issue is uncertain. Two judges of the Faludi concluded that a “day rate” could meet the salary base test, and two judges from the Hewitt case decided otherwise. Regardless of the outcome of the Fifth Circuit, however, it’s still interesting that the Colorado District found the original. Faludi the rationale was more convincing.
Until this issue is finally resolved, any employer paying a “per diem rate” – especially employees in Texas, Louisiana, and Mississippi – should carefully review their compensation practices with a lawyer to determine if they are running. risk of unpaid overtime and take prompt action to mitigate that risk.
1 See Scott v. Antero Resources Corp., N ° 17-CV-0693-WJM-SKC, 2021 WL 2012326, at * 1 (D. Colo. May 20, 2021).
2 See Faludi v. US Shale Solutions LLC, n ° CV H-16-3467, 2017 WL 5969261, at * 1 (SD Tex. November 30, 2017), partially confirmed, partially canceled, returned under name. Faludi v. US Shale Solutions, LLC, 936 F.3d 215 (5th Cir. 2019), as revised (22 Aug 2019), notice withdrawn and replaced, 950 F.3d 269 (5th Cir. 2020), and confirmed in part, canceled in part, returned as last name. Faludi v. US Shale Solutions, LLC, 950 F.3d 269 (5th Cir. 2020).
3 See Scott v. Antero Resources Corp. to 6.
4 See Hewitt v. Helix Energy Solutions Group, Inc., 983 F.3d 789 (5th Cir. 2020).
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