The Court has broken the logjam of pending opinions, rendering three decisions today, one of which, dealing with the issue of when overtime pay is mandated under the Fair Labor Standards Act (FLSA), might have a broader effect. So, let's start with that one: Helix Energy Solutions Group, Inc. v. Hewitt.
Michael Hewitt sued his employer, Helix, seeking overtime pay under the FLSA. Over a four-year period, Hewitt worked on an offshore oil rig, averaging 84 hours per week, for which Helix paid him a daily rate with no overtime compensation. Nevertheless, Hewitt's compensation was substantial, more than $200,000 annually. Helix asserted that Hewitt was exempt from the FLSA requirement because he qualified as “a bona fide executive.” 29 U. S. C. §213(a)(1). That standard applies, under Department of Labor regulations, if an employee meets three distinct tests: (1) the “salary basis” test, which requires that an employee receive a predetermined and fixed salary that does not vary with the amount of time worked; (2) the “salary level” test, which requires that preset salary to exceed a specified amount; and (3) the job “duties” test.
The Secretary of Labor has implemented the bona fide executive standard through two separate and slightly different rules—a “general rule” applying to employees making less than $100,000 annually, the other covering “highly compensated employees” (HCEs) who make at least $100,000 per year. The general rule considers employees to be executives when they are “[c]ompensated on a salary basis” (salary-basis test), “at a rate of not less than $455 per week” (salary-level test), and carry out three listed responsibilities: managing the enterprise, directing other employees, and exercising power to hire and fire (duties test). §541.100(a). The HCE rule relaxes only the duties test, while restating the other two.
Upholding the decision of the Fifth Circuit, the Supreme Court, in an opinion written by Justice Kagan, and joined by the Chief Justice and Justices Thomas, Sotomayor, Barrett, and Jackson, with Justices Gorsuch, Kavanaugh, and Alito in dissent, held that Hewitt was not an executive exempt from the FLSA’s overtime pay guarantee. The intramural dispute among the Justices was based on how they read the text. In contradistinction to other recent administrative law decisions, there was no question of the agency's authority to regulate, and there was no question of agency deference. The only question was what the two regulations in question required and, specifically, whether Hewitt was paid on a salary basis.
The regulation provides that an employee is paid on a salary basis only if he “receive[s] the full salary for any week in which [he] performs any work without regard to the number of days or hours worked.” Whenever an employee works at all in a week, he must get his “full salary for [that] week,” i.e., a “predetermined amount” given “without regard to the number of days or hours worked” even if the employee worked less than the full week. The Court's majority agreed that, according to its ordinary meaning, nothing in the regulatory description fit a daily-rate worker who is paid for each day he works and no others. Moreover, the Court held that "salary" is something that is structured and stable and that its determination is one of addressing the amount of compensation, not how often it is paid. Thus, the fact that the employee received checks every two weeks in a weekly amount always exceeding $455 is irrelevant. In rejecting the employer's position, the majority notes that the whole point of the salary-basis test is to preclude employers from paying workers neither a true salary nor overtime. Helix’s complaints about retroactive liability also lack force because the salary-basis test is not novel, but rather traces back to the FLSA’s beginnings.
It is not the function of this blog to endorse the Court's reasoning, but merely to analyze and report it. Nor is it to give legal advice. Thus, in reading the majority's opinion, which crosses the ideological spectrum, and comparing it to the two dissenting opinions that note related FLSA issues that very well might return to the Court, I simply suggest that the Helix Energy case represents an event of significance for many employers of substantially compensated hourly workers and that it would be useful for them to consult both with their compensation consultants and attorneys to assess the potential retroactive consequences of the decision and appropriate future courses of conduct.
To most practitioners other than those who represent individual criminal defendants, the most interesting feature of the Court's decision in Cruz v. Arizona is the lineup of Justices on both sides of the case. As was the case with Helix Energy, the majority opinion was written by a jurisprudentially liberal Justice, in this case, Justice Sotomayor, who found allies in the Chief Justice and Justice Kavanaugh, along with the other two "liberals," Justices Kagan and Jackson (the remaining "conservatives" lining up behind the dissent of Justice Barrett).
As to the case itself, John Montenegro Cruz was found guilty of capital murder by an Arizona state-court jury and sentenced to death. As he did in the courts below, he argued to the Supreme Court that, under Simmons v. South Carolina, 512 U. S. 154 (1994), he should have been allowed to inform the jury that a life sentence in Arizona would be without parole. He claimed that, because after his conviction had become final, the Supreme Court held in Lynch v. Arizona, 578 U. S. 613 (2016) (per curiam), that it was an error to conclude that Simmons “did not apply” in Arizona, he was entitled to raise the Simmons issue in a post-conviction petition, as “there has been a significant change in the law that, if applicable to the defendant’s case, would probably overturn the defendant’s judgment or sentence.”
Here, the Supreme Court's majority rejected the view of the Arizona Supreme Court that Lynch was not “a significant change in the law,” and this was an “exceptional case” where a state-court judgment rests on such a novel and unforeseeable interpretation of a state-court procedural rule that its decision is not adequate to foreclose review of the federal claim. The Supreme Court ordinarily will not decide a question of federal law in a case if the state-court judgment “rests on a state law ground that is independent of the federal question and adequate to support the judgment,” but whether Arizona’s “state procedural ruling is adequate is itself a question of federal law.”
I have suggested in the past that in many capital cases presenting technical procedural arguments, the positions of individual Justices reflect their views about capital punishment itself, or at least as to the breadth of trial procedures afforded to capital defendants. Whether or not this view is generally true, the presence of the Chief Justice and Justice Kavanaugh in the majority more predictably led by a Justice like Sotomayor is noteworthy.
Finally, at least for today, is Bartenwerfer v. Buckley, in which a unanimous Court held that the Bankruptcy Code, 11 U. S. C. §523(a)(2)(A), bars debtors from discharging a debt obtained by fraud of the debtor’s agent or partner regardless of the debtor's lack of culpability. Despite the fact that the plain language of Section 523 makes no such distinction, Kate Bartenwerfer argued that “money obtained by fraud” necessarily means money obtained by an individual debtor’s fraud. All the Justices disagreed. As Justice Barrett writes, the passive voice in §523(a)(2)(A) does not hide the relevant actor in plain sight; it removes the actor altogether. Congress framed §523(a)(2)(A) to “focu[s] on an event that occurs without respect to a specific actor, and therefore without respect to any actor’s intent or culpability.”
That's it for now, but there is a large number of decisions pending, so it is likely that we'll be back soon.
- Member of the Firm