Baldwin Haspel Burke & Mayer LLC

Maritime Update: The Fair Labor Standards Act and the Maritime Industry

Bill Schwartz -  Posted on by Baldwin, Haspel, Burke & Mayer

The Fair Labor Standards Act and the Maritime Industry

There are now three cases which deserve your attention since they involve maritime workers and how they are to be paid.  The question presented is whether the worker is entitled to overtime pay and not just their daily rate of pay under the Fair Labor Standards Act (FLSA).  Unfortunately, the disparity in these rulings will leave some uncertainty throughout the maritime industry and upend the industry’s legitimate and longstanding expectations as to the FLSA’s seaman exemption.  More specifically, while the FLSA exempts seaman from overtime pay, these decisions by the Fifth Circuit Court of Appeals covering Texas, Louisiana and Mississippi demonstrate it will be difficult to know when and how an employee will be considered a seaman and when the overtime rates may apply.

 

Hewitt v Helix Energy Solutions Group:

In the United States Court of Appeals for the Fifth Circuit, the entire court met (en banc) and decided the case of HEWITT v. HELIX ENERGY SOLUTIONS GROUP, INCORPORATED on September 9, 2021.  In that decision, a toolpusher who was paid a six figure amount ($200,000 + per year) during his employment was still found to be entitled to a 50 percent overtime rate for any hours he worked over 40 hours per week.

Hewitt worked as a tool pusher for Helix on a floating semisubmersible vessel 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. The Fair Labor Standards Act (FLSA) established a standard 40-hour work week by requiring employers to pay a 50 percent overtime amount for any time worked over 40 hours per week.  Helix conceded in this lawsuit that it paid Hewitt based solely on a daily rate; not based on the hours worked per day.  Helix also conceded that it required Hewitt to work well over forty hours per week.  The company nevertheless attempted to avoid the FLSA overtime penalty by characterizing Hewitt as a “highly compensated executive employee”.

To prevail under that approach, however, Helix was required to show that it paid Hewitt on a “salary basis” as defined by the regulations. Under the FLSA, a  “highly compensated employee” must be paid on a “salary basis” in order to avoid overtime. Under the FLSA, an employee whose pay is “computed on a daily basis” (like Hewitt) must meet certain conditions in order to satisfy the salary-basis test.  And Helix readily admitted in this suit that Hewitt’s pay was “computed on a daily basis.” As a result, Helix was obligated to pay Hewitt overtime unless his pay complied with the FLSA.

The regulations contained a special rule dictating what 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 basiswithout losing the exemption or violating the salary basis requirementif 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.”

This meant that an employer like Helix could pay a daily rate and still satisfy the salary-basis test 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.”

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.”  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.

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 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).”

Helix was found by the Court to have failed to comply with either prong of this salary-basis test.

First, it paid Hewitt a daily rate without offering a minimum weekly required amount paid “regardless of the number of hours, days or shifts worked”.   Helix theorized that Hewitt’s daily rate was 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.”

Second, Helix did not comply with the reasonable-relationship test. Helix paid Hewitt orders of magnitude greater than the minimum weekly guaranteed amount theorized by Helix (Hewitt’s daily rate). Tellingly, Helix did not contend that it satisfied the reasonable-relationship test.

 

Adams v. All Coast, L.L.C.

The same Fifth Circuit Court of Appeals this past Thursday (September 30, 2021) said workers aboard liftboats who use cranes attached to the boats to load equipment onto offshore oil rigs are not “seamen” and thus are entitled to overtime pay under federal wage law.  Instead, when operating the cranes, the Court considered these employees to be engaged in industrial activities that had no bearing on the operation or navigation of liftboats.

By way of background, liftboats are self-propelled supply vessels with three column-like legs, which can be lowered to the sea floor to raise the vessel out of the water.  All Coast owned and operated a number of these liftboats.  In this matter, a former All Coast employee William Adams, claimed he and other liftboat workers were misclassified as seamen.  The classification of seaman would again mean they are exempt from the Fair Labor Standards Act; i.e. if exempt from the FLSA, they are not entitled to overtime pay after working more than 40 hours per week.  Adams therefore claimed since he was not a seaman, he was unlawfully deprived of overtime pay. Adams claimed he spent up to 90% of his time operating cranes and not servicing the boats.

The Appeals Court said that while the workers “acted as a normal nautical crew” when a boat was on the move, the loading and unloading duties they primarily performed had no connection to liftboat operation.  The employer had argued that when liftboats were jacked up and not in motion, the crew members performed quintessential seaman’s work such as standing lookout, checking engines and cleaning.  The employer further argued that without the cranes, the liftboat served no transportat(ion) purpose essential to finding a vessel for seaman status.  ”

The case was sent back to the trial court to determine if the crew would be considered “seamen” and thus exempt from the FLSA in their job duties as cooks aboard the liftboat.  In sending the case back for this determination in the trial court, the Fifth Circuit noted”  “Like any other crew member, a cook is a seaman ‘if, as is the usual case, [his] service is “rendered primarily as an aid in the operation of such vessel as a means of transportation, provided he performs no substantial amount work of a different character. A cook is usually a seaman because he usually cooks for seamen.”

The Court then noted that a 20% time period was to be used as a guide.  With that regulatory cutoff as a guide, “…a cook who spends more than roughly 20 percent of his time cooking for non-crew members or, as here, crew members who are non-exempt seamen (remember the crane operators were now found in the case not to be seaman), has spent a “substantial” amount of time on differing work.”  As a result, while the case was sent back for such a determination by the trial court, it seems unlikely the men serving as “cooks” would be entitled to seaman status exempt from overtime pay.

 

Coffin v Blessey Marine Services

In a case decided by the same Fifth Circuit Court in 2014, they concluded that tankerman assigned aboard pushboats operated by Blessey Marine Services were seaman when performing their jobs of loading and unloading of the barges in the tow of their vessel.

In the Coffin case, the appeals court noted that “… in some, perhaps in many, situations and circumstances involving loading and unloading duties, the work is nonseaman.”  However, here they concluded that Blessey Marine had produced evidence which demonstrated the loading or unloading of the liquid cargo to and from the barges required precision such that the barge could operate safely.   As a result, this work of the loading and unloading was part of seaman’s work.  Therefore, the crew were exempt from being paid overtime under the FLSA.

These differing results do not provide the consistency that we expect from the Courts to give an employer (and the employee) a reasonable expectation how they will be paid for their services.  Further, there is a distinction in whether they would be considered a seaman for Jones Act status and entitlement to the protections of the general maritime law and when they will be considered a seaman for the FLSA.

 

Stay tuned. There will be more cases and more appeals on this issue. If you wish to discuss this, please feel free to contact Dave Carrigee, Jill Willhoft or Bill Schwartz.


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