What does the Fifth Circuit’s recent FLSA decision mean for Pennsylvania’s gas drilling industry?

On Behalf of | May 2, 2022 | Blog, Fair Labor Standards Act (FLSA) |

As an extractor of natural gas in Pennsylvania’s Marcellus Shale region, no one need to tell you the importance of having an experienced employment law attorney on your side. Perhaps no area of employment is more fraught with the potential for lawsuits than the overtime provisions covered by the Fair Labor Standards Act.

As reported by the National Law Review, a recent decision by the Fifth Circuit Court of Appeals makes your need for sound legal advice and counsel even more relevant.

The Hewitt decision

In Hewitt v. Helix Energy Solutions Group, the issue in dispute was whether the FLSA’s Highly Compensated Employee exemption should stand alone or apply in conjunction with other salary provisions. The Court ruled in favor of the latter position.

The HCE exemption applies to any employee who regularly performs one or more exempt executive, professional or administrative duties and earns at least $107,432 per year. In Hewitt’s case, the employee in question was a tool pusher paid a daily rate of $963. Hewitt’s position was that the HCE exemption made this employee ineligible for overtime. The Court disagreed, holding that day-rate employees do not meet the Department of Labor’s “salary basis” prong required for exemption.

In fact, the Court looked at the following three provisions of 29 C.F.R:

  1. The salary-basis regulation set forth in Section 541.602(a)
  2. The reasonable relationship regulation set forth in Section 541.604(b)
  3. The HCE exemption set forth in Section 541.601(a)

Interestingly, the Fifth Circuit looked to the Sixth Circuit’s decision in Hughes v. Gulf Interstate to support its ultimate opinion that day workers, no matter how highly paid, still qualify for overtime.

Likely Fallout

While neither the Fifth nor Sixth Circuit covers Pennsylvania, with two circuits now holding that oil and gas producers must pay their day workers overtime, the HCE exemption has been seriously impacted. A Third Circuit challenge is almost a certainty.