October 3
Delaware v. Pennsylvania and Wisconsin
No. 22-1045, Original
Preview by John Tuley, Member
In Delaware v. Pennsylvania and Wisconsin, the Court will decide whether MoneyGram’s “Official Checks,” which are used to pay third parties, constitute a “money order, traveler’s check, or other similar written instrument (other than a third party bank check)” under the Federal Disposition of Abandoned Money Orders and Traveler’s Checks Act (“FDA”). 12 U.S.C. § 2503.
MoneyGram allows customers to purchase an “Agent Check” or “Teller’s Check” which can be given to a third party and exchanged by the third party for cash value. Unlike a money order, which MoneyGram also sells directly to consumers, these “Official Checks” must be signed by a bank employee, and banks cannot label these products “money orders.” Exceptions to Report of the Special Master by the State of Delaware and Brief in Support of Exceptions at 11, Delaware v. Pennsylvania and Wisconsin, No. 22-1045 (U.S. filed Nov. 18, 2021).
Frequently, these Official Checks are not deposited by the third party and left unclaimed. Unclaimed money orders are escheated to the state where the money order was purchased pursuant to the FDA. 12 U.S.C. § 2503. However, for Official Checks, Delaware escheated the unclaimed money as MoneyGram’s state of incorporation. Twenty states hired auditors to review the escheatment and eventually issued a letter to MoneyGram alleging improper escheatment totaling millions of dollars. Exceptions to Report of the Special Master by the State of Delaware and Brief in Support of Exceptions at 12.
Pennsylvania and Wisconsin sued in federal district court, but Delaware moved for leave to file a bill of complaint with the Supreme Court, which all parties stipulated to. Arkansas and 28 other states filed suit against Delaware, and the Court merged the suits together. The Special Master appointed by the Court to hear the claims found that the Official Checks either are money orders or are similar enough to constitute an “other similar written instrument” under the FDA, and thus Delaware had wrongly escheated these funds. First Interim Report of the Special Master at 63, Delaware v. Pennsylvania and Wisconsin, No. 22-1045 (U.S. filed July 23, 2021).
Delaware argues that when Congress adopted the FDA, “money orders” did not refer to all prepaid orders to pay money, only commercially labeled money orders or telegraphic services for sending money, not traveler’s checks or cashier’s checks. Exceptions to Report of the Special Master by the State of Delaware and Brief in Support of Exceptions at 33. Additionally, they argue that legislative history shows that Congress didn’t intend to cover traveler’s checks which would produce too high of an administrative burden for the escheatment process. Id. at 29-30. Thus, they argue that the definition argued by the states and accepted by the Special Master is overbroad. Id. Delaware further argues that under the statutory interpretation canon of narrow construction of statutes to avoid derogation of the common law, the FDA should not be construed to cover these Official Checks. Id at 33.
The Respondent States argue that Official Checks are “prepaid drafts issued by a business entity for transmitting money to a payee” and thus falls squarely within what Congress intended to regulate under the FDA. Reply of Defendants in No. 145 and Plaintiffs in No. 146 to Delaware’s Exceptions to First Interim Report of Special Master and Supporting Brief at 27, Delaware v. Pennsylvania and Wisconsin, No. 22-1045 (U.S. filed Dec. 20, 2021). The Respondent States also argue that it is inequitable for Delaware to keep over $250 million in unclaimed money when only 0.5% of Official Checks are purchased in Delaware. Id. The Respondents also argue that the statutory interpretation cannon to avoid derogation of the common law is not applicable here, because Congress through the FDA intended to change the common law, so a ruling in the Respondents’ favor would only uphold this intent. Id.
This case is important for two main reasons. First, this case will clarify whether a state will be able to take command of hundreds of millions of dollars, solely because a company is incorporated in that state. Second, it will provide a glimpse into how the Supreme Court will view these statutory interpretation issues during the new term. This decision could be a guidepost for future cases bringing statutory interpretation questions.
October 4
Merrill v. Milligan
No. 21-1086, N.D. Ala.
Preview by Gretel Zumwalt, Member
The issue in Merrill v. Milligan is whether Alabama’s newly enacted congressional district map dilutes Black votes in violation of Section 2 of the Voting Rights Act (VRA) of 1965, 52 USC 10301, which prohibits racially discriminatory voting practices.
Alabama’s congressional district plan compacted the majority of the Black voting age population into a single district, District 7. The remaining Black voters were dispersed into districts with a supermajority of white voters. Thus, Black Alabamians could theoretically only elect their preferred candidates in one of the seven districts (14%) but represent 26.8% of the population. Alabama QuickFacts, United States Census Bureau (2021). Alabama argues the map is “race neutral.” Reply Brief for Appellants at 2, No. 21-1086 (U.S. filed Aug. 24, 2022).
A District Court panel of three judges agreed Alabama’s congressional map violated the VRA and required Alabama to redraw congressional districts to allow a second district for Black voters to elect preferred candidates in time for the 2022 midterms. Alabama appealed the decision, which was stayed by the Supreme Court pending appeal.
Defendant-Appellant Secretary Merrill argues redrawing based on racial considerations would violate the Equal Protection Clause of the Fourteenth Amendment. Id. Justice Ketanji Brown Jackson’s use of originalism to explain the purpose of the 14th Amendment to encourage race consciousness in voting post slavery was praised as a novel explication of the doctrine at Oral Arguments on October 4th. (Transcript of Oral Argument at 57, No 21-1086). Originalism is a form of interpretation which relies on how the Constitution was understood at the time it was written.
Plaintiff-Appellees point to Thornburg v. Gingles, 578 U.S. 30 (1986), Supreme Court Section 2 precedent, that established a framework for preventing undue consideration of race in redistricting. By preventing undue consideration, Gingles allowed some consideration of race to create equal access to voting rights. Brief for Appellees at 2, No 21-1086 (U.S. filed July 11, 2022). Some consideration, according to the Plaintiffs, does not violate the Equal Protection Clause because the clause prohibits “only state action” whereas the action in Merrill v. Milligan is “private conduct.” Id. at 44.
Alabama additionally argues Plaintiffs must show that Alabama intentionally discriminated against Black voters for Section 2 to apply. Reply Brief for Appellants at 6, No. 21-1086. Plaintiff-Respondents again emphasize Gingles, which explicitly rejected an intentional discrimination requirement and instead adopted a fact-intensive “totality of circumstances” standard. Brief for Appellees at 2, No 21-1086.
The decisions reached in Merrill v. Milligan will have lasting implications on the role of race in redistricting nationwide under the Voting Rights Act. Ensuring minorities, which have long been oppressed throughout the history of the United States, have the ability to elect candidates representative of their opinions is critical. At issue is also the continued vitality of the Voting Rights Act, which the Court could strike decisively down in Merrill.
Arellano v. McDonough
No. 21-432, Fed. Cir.
Preview by Josemiguel DeJesus Rodriguez, Member
In Arellano v. McDonough, the Court will rule on whether 38 U.S.C. § 5110(b)(1) permits equitable tolling when a veteran seeks retroactive disability benefits. 5110(b)(1) requires that veterans’ disability benefits be awarded the day after a veteran is discharged from service if the veteran’s application for disability benefits is received within one year of the veteran’s date of discharge.
Equitable tolling is the rebuttable presumption that a court must lift a statutory deadline. The Court has used equitable tolling when claimants met a statutory deadline but filed a defective pleading, or when claimants were induced by their adversaries’ misconduct into missing a statutory deadline, but not when a claimant failed to file a timely complaint because his attorney did not receive the agency notice to file. Irwin v. Dep’t Veterans Affs., 498 U.S. 89, 96 (1990).
The Petitioner in Arellano, Adolfo Arellano, wants retroactive benefits for the trauma he suffered in a shipwreck back to when Arellano was discharged in 1981. The Respondent, Secretary of Veterans Affairs Denis McDonough, wants to keep a divided Federal Circuit panel’s ruling that disability benefits should accrue for Arellano from when Arellano submitted his application for benefits, in 2011, and not from when Arellano was discharged. Half of the judges on the Federal Circuit panel reasoned that the text of 5110(b)(1) evinces clear intent from Congress to foreclose equitable tolling. The other half reasoned that, although 5110(b)(1) was subject to equitable tolling, Arellano’s specific circumstances did not justify equitable tolling.
Petitioner frames the threshold question before the Court as whether Congress waived sovereign immunity to allow veterans with service-connected disabilities to pursue disability claims. Petitioner relies on legislative history suggesting congressional intent to maintain a non-adversarial system of service-connected disability compensation when answering this threshold question in the affirmative. Brief for Petitioners at 27, Arellano v. McDonough, No. 21-432, (U.S. May 13, 2022). Respondent frames the threshold question as whether the deadline in 5110(b)(1) qualifies as a statute of limitations. Respondent cites the common-law limit on equitable tolling’s application to statutes of limitations to argue that equitable tolling was intended only to allow meritorious lawsuits to proceed despite this procedural bar. Brief for Respondents at 9, 15-19, Arellano v. McDonough, No. 21-432, U.S. July 18, 2022). The Court heard oral arguments in Arellano on October 4, 2022.
That a servicemember will sustain injuries in active duty is not a remote possibility. Veterans with mental health symptoms like Arellano’s face daily “survival tests”: “flashbacks, nightmares, obsessional thoughts of suicide.” Brief for Nat’l L. Sch. Veterans Clinic Consortium as Amicus Curiae Supporting Petitioners at 2, Arellano v. McDonough, No. 21-432, (U.S. May 20, 2022). Veterans who suffer sexual trauma in the line of duty are unlikely to report post-traumatic stress and are thus likely to miss the statutory deadline in 5110(b)(1). Id. at 6. Veterans with these mental health symptoms remain active duty, in mind if not in body. Arellano presents the Court with these concerns plus Veterans Affairs’ interest in predictable resource allocation.
October 11
National Pork Producers Council v. Ross
No. 21-468, 9th Cir.
Preview by Maria Schaible, Associate
The issue in National Pork Producers Council v. Ross is whether a California law that prohibits the in-state sale of pork produced using certain confinement measures violates the Dormant Commerce Clause. The Dormant Commerce Clause (“DCC”) is a doctrine inferred from the Commerce Clause in Article I of the U.S. Constitution, gives Congress the power to regulate commerce “among the several states.” U.S. Const. art. I, § 8, cl. 3. Because the power to regulate interstate commerce is given to the federal government, the DCC declares that states are prohibited from enacting laws that interfere with interstate commerce.
In 2018, California enacted Proposition 12, which prohibits the in-state sale of pork that was produced using methods deemed inhumane by the state of California, regardless of where that pork was produced. Prop. 12 (codified Cal. Health & Safety §§ 25990–25994) (Dec. 19, 2018)). Specifically, Proposition 12 outlaws the use of gestation crates—metal cages that house breeding pigs—that are less than 24 square feet of floor space. Id. The industry standard size for gestation crates is 14 square feet, or approximately half of the California standard.
Representing the pork industry, the National Pork Producers Council brought suit claiming that Proposition 12 violates the DCC by placing an undue burden on interstate commerce and by causing an impermissible extraterritorial effect because it effectively requires all pork producers, regardless of the state in which the pork is produced, to comply with California standards. Brief for Petitioners at 3, National Pork Producers v. Ross, No. 21-468 (U.S. filed June 10, 2022). The group claims that increasing the size of gestation crates would be unduly expensive, and that therefore, the California standards have an impermissible effect on the economy of other states. Id.
The U.S. District Court for the Southern District of California dismissed the suit for failure to state a claim, and the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal. Nat’l Pork Producers Council v. Ross, 6 F.4th 1021, 1025 (9th Cir. 2021). The Supreme Court granted certiorari on March 22, 2022, and oral arguments were held on October 11, 2022.
Before the Supreme Court, the Humane Society of the United States, as intervening respondents, argued that Proposition 12 applies only to the in-state sale of pork products, and that as such, pork producers outside of California may continue to confine animals as they see fit for pork sold outside of California. Brief for Intervenor Respondents at 9, National Pork Producers v. Ross, No. 21-468 (U.S. filed Aug. 10, 2022). The respondents assert that the standard for finding a DCC violation is high, and that petitioners have not alleged that the standard has been met here. The petitioners, on the other hand, maintain the position that Proposition 12 violates the DCC by requiring out-of-state producers to comply with the California standards. Proposition 12’s “practical effects,” petitioners argue, are “almost entirely extraterritorial.” Brief for Petitioners at 3.
Courts have rarely invalidated state statutes under the Dormant Commerce Clause. Arguably, most state statutes have some effect on other states. A decision in favor of the pork industry in this case, however, may lower the standard for finding a DCC violation, thus opening the floodgates to federal oversight of state laws.
Reed v. Goertz
No. 21-442, 5th Cir.
Preview by Matthew Gorski, Member
In Reed v. Goertz, the Supreme Court will decide whether the statute of limitations for a 42 U.S.C. § 1983 claim seeking post-conviction DNA testing of crime-scene evidence begins to run at the end of state-court litigation denying DNA testing, including any appeals, or whether it begins to run at the moment the state trial court denies DNA testing, despite any subsequent appeal.
Petitioner Rodney Reed was convicted of capital murder and sentenced to death for the 1996 murder of Stacey Stites in Bastop County, Texas. In July 2014, Reed filed a motion in state court under Article 64 of the Texas Code of Criminal Procedure, requesting Texas to consent to DNA testing of allegedly exculpatory DNA evidence from the crime scene. Under Article 64, convicted individuals may obtain access to post-conviction DNA testing if they show by a preponderance of evidence that they “would not have been convicted if exculpatory results had been obtained through DNA testing.” Brief for Respondent at 4, Reed v. Goertz, No. 21-442 (filed Aug. 23, 2022) (quoting Tex. Code Crim. Proc. art. 64.03(a)(2)(A)). After making this showing, a Texas state trial court may order DNA testing if it further determines that the DNA evidence at issue was “subjected to a chain of custody sufficient to establish that it has not been substituted, tampered with” or altered. Id. at 4-5 (quoting Tex. Code Crim. Proc. art. 64.03(a)(1).
In November 2014, the state trial court denied Reed’s motion. After two years of additional fact finding, the state trial court affirmed in September 2016, concluding that the items Reed requested for DNA testing failed the chain of custody requirements. In April 2017, the Texas Court of Criminal Appeals (CCA) affirmed the trial court’s denial of DNA testing on the grounds that the DNA exhibits were mishandled and contaminated, and that Reed had not proven by a preponderance of evidence that he would not have been convicted had these items been tested. In October 2017, the CCA denied rehearing.
In August 2019, Reed sued the Bastrop County Criminal District Attorney Bryan Goertz in federal district court under 42 U.S.C. § 1983, alleging that Goertz directed or caused custodians of the exculpatory DNA evidence to refuse to allow Reed to conduct DNA testing. Reed challenges the CCA’s construction of Article 64 as violating his due process rights because it conditions his state right to prove his innocence with DNA evidence on compliance with “fundamentally unfair procedures.” Brief for Petitioner at 14, Reed v. Goertz, No. 21-442 (filed July 1, 2022).
After the district court dismissed Reed’s complaint for failure to state a claim, the Court of Appeals for the Fifth Circuit affirmed on the alternative ground that Reed’s action was untimely. In applying the two-year statute of limitations in Texas for personal injury claims, the Fifth Circuit held that Reed’s claim accrued in November 2014 when the state trial court denied his Article 64 motion, reasoning that at this point Reed “first became aware that his right to access th[e] evidence was allegedly being violated.” Brief for Respondent at 10 (quoting Pet. App. 9a).
Petitioner Reed asserts that his § 1983 claim is not untimely because it accrued in October 2017, after the CCA issued its authoritative construction of Article 64 and denied rehearing. Relying on “long-established common-law and equitable principles,” Reed argues that a § 1983 claim accrues when a plaintiff has a “present and complete cause of action,” which he did not have until the CCA’s authoritative interpretation of Article 64 became final. Brief for Petitioner at 18. Reed argues that he could not have challenged the “extratextual requirements like the non-contamination element for the chain-of-custody inquiry” in the CCA’s interpretation as unconstitutional until it was rendered. Id. at 18-19. In addition to equitable principles, Reed asserts that his accrual date promotes federalism and judicial economy because it “promotes the due process interest in adjudicative accuracy by permitting prisoners to seek DNA testing through available state procedures.” Id. at 19.
Respondent Bryan Goertz argues, on the contrary, that the statute of limitations began to run “when the state courts first imposed those [chain of custody] requirements through the trial court’s September 2016 order.” Brief for Respondent at 11. In the alternative, Goertz argues that even if the Supreme Court
accepts Reed’s contention that his due process claim could not have accrued until the CCA affirmed the trial court’s chain of custody ruling, Reed’s claim would still be barred by the statute of limitations because the CCA issued its decision in April 2017, more than two years before Reed brought his § 1983 claim in August 2019.
A finding of untimeliness, Goertz asserts, is also consistent with how federal and Texas courts understand the authority of appellate court opinions because it is “the CCA’s opinion, not its order denying rehearing, that binds lower courts and the parties to the case.” Id. at 12. Relying on federal-state comity concerns, Goertz argues that federal courts must recognize the authority of the CCA’s constructions of state law “when they are pronounced,” and avoid ascribing less authority to a CCA decision than state courts afford. Id.
Far more than addressing a technical detail in applying a statute of limitations, Reed v. Goertz presents compelling issues of post-conviction access to exculpatory DNA evidence, and procedural protections for individuals with capital sentences claiming that they were falsely convicted. Reed also involves issues relating to race and criminal justice reform based on claims that Reed’s original prosecution may have involved racial prejudice. See Brief of the NAACP Legal Defense & Educational Fund as Amicus Curiae Supporting Petitioner at 8-12, Reed v. Goertz, No. 21-442 (filed July 8, 2022). A result favorable to Reed would signal a judicial attitude amenable to increasing access to post-conviction DNA testing for defendants whose convictions may stem from racially-motivated prosecutions. It would also represent an important victory for advocates of criminal justice reform seeking to improve access to procedures used to challenge convictions tainted by the specter of racial bias. Id. at 30.
October 12
Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith
No. 21-869, 2nd Cir.
Preview by Ronghong Dai, Associate
In Andy Warhol Foundation for the Visual Arts, Inc. v. Lynn Goldsmith, the Supreme Court will determine if Andy Warhol, who used Lynn Goldsmith’s copyrighted photograph of the music legend Prince as the basis for his Prince Series, can invoke the fair use doctrine to avoid copyright infringement.
Congress includes in the Copyright Act of 1976 a four-pronged test to determine whether a work is fair use. 17 U.S.C. § 107. The first factor of the test directs courts to look at “the purpose and character of the [secondary] use.” Id. When applying this factor, the Supreme Court in Campbell v. Acuff-Rose Music, Inc. in 1994 considered whether the secondary use is “transformative,” i.e., “whether the new work merely supersedes the objects of the original creation or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.” 510 U.S. 569, 579 (1994). How to determine if Warhol’s Prince Series is “transformative” has proven to be the main battle in this case.
In 1981, Goldsmith took a series of portraits of Prince in her studio. Warhol v. Goldsmith, 992 F.3d 99, 106 (2d Cir. 2021). In 1984, Goldsmith licensed through her agent the disputed photograph in this case to Vanity Fair magazine to create a work of art based on the image. Id. Vanity Fair then commissioned Warhol to create the work of art for its magazine cover. Id. Without permission from Goldsmith or her agent, Warhol made 15 additional works based on Goldsmith’s photograph. Id. at 107. After Warhol’s death, the Andy Warhol Foundation for the Visual Arts, Inc. (hereinafter referred to as “AWF”) acquired the title and copyright to those 15 additional works and sold them to third parties. Id. at 108. In 2016, Goldsmith learned of the sales and contacted the AWF regarding potential copyright infringement. Id. In 2017, the AWF sued Goldsmith and her agent for a declaratory judgment of fair use; in response, Goldsmith countersued for copyright infringement. Id.
The District Court for the Southern District of New York ruled that Andy Warhol made fair use of the photograph because the artwork was sufficiently “transformative”—i.e., conveying a different message from the original. Warhol v. Goldsmith, 382 F. Supp. 3d 312, 325–26 (S.D.N.Y. 2019). In 2020, the Second Circuit reversed this decision, stating that Warhol’s work should not be protected under the fair use doctrine because like a film adaptation, Warhol’s print is nothing more than an adaptation of Goldsmith’s photograph in a different format. 992 F.3d at 111–12.
Petitioner AWF argues that the Prince Series is transformative, invoking Campbell, in which the Supreme Court decides that if a secondary work injects new meaning or message into the original work, the copy can qualify as transformative use. Brief for Petitioner at 29, Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, No. 21-869 (filed June 10, 2022). Further, AWF argues that instead of following Campbell’s meaning-or-message test, the Second Circuit avoided determining the meaning of the artwork, but instead relied entirely on comparing facial visual similarities between the copyrighted work and the follow-on work to determine whether it was transformative. Id. at 31.
Goldsmith argues conversely that Warhol did not make a transformative use of her photograph because the Supreme Court permits fair use only when copying was necessary, but here Warhol did not need to copy her photograph specifically to depict Prince. Brief for Respondents at 20–21, Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, No. 21-869 (filed Aug. 8, 2022). She further argues that AWF’s any-new-meaning-message test is not workable because artists, critics, and ordinary viewers may have different interpretations of an artwork, and those interpretations also may change over time. Id. at 51.
The decision of the Court in this case could reshape the fair use defense to copyright infringement for countless follow-on works in the art world. Brief for Petitioner at 54–55. Beyond that, the decision could have an impact on licensing markets across creative contexts. Brief for Respondents at 21–22. The key challenge for the Supreme Court here is to operationalize the standard in Campbell and guide the lower courts as to what constitutes a transformative use that is entitled to a fair use defense. See generally 510 U.S. 569.
Helix Energy Solutions Group, Inc. v. Hewitt
No. 21-984, 5th Cir.
Preview by Rachel Blau, GWLR Member
Are employees who make over $200,000 per year exempt from receiving overtime pay under the FLSA?
On December 29, 2014, Michael Hewitt (Respondent) began working as an employee for Helix Energy Solutions Group, Inc. (“Helix”), as a “Tool Pusher” at an offshore oil rig, where he was paid a daily rate of $983.00. (ROA.197, 204-05, 816). Respondent Brief in Opposition at 3, Helix Energy Solutions Grp. Inc. v. Hewitt, No. 21-984, (U.S. Filed Mar. 21, 2022). In this capacity he supervised several other employees and ensured that the rig complied with “client and company procedures” (ROA.204-05) Respondent Brief in Opposition at 3. He was terminated from his position less than three years later on August 3, 2017. Id. Following his termination Hewitt sued his employer for overtime wages that he claims were owed under the Fair Labor Standards Act (“FLSA”). In response, Helix argued that Hewitt was a “Highly Compensated Employee” (“HCE”) and therefore not entitled to overtime under the FLSA.
The FLSA generally requires that where workers work overtime, more than 40 hours per week, they must be paid “time and a half” for each hour over 40 worked. 29 U.S.C. § 207(a)(1). However, there is a regulatory exemption for HCEs. 29 C.F.R. §541.601. HCEs are employees who (1) work in an executive, administrative, or other professional function (2) make more than $455 per week or $100,000 per year, and (3) earn this pay on a “salary basis.” 29 C.F.R. § 541.601 (“HCE Test”). The first two prongs are not in dispute: indeed, Respondent had a supervisory or administrative role, and he was paid above the salary level. The question in this case is whether Hewitt met the “salary basis” requirement under § 541.601, and which test – 29 C.F.R. § 541.602 or 29 C.F.R. § 541.604 – applies to guide the analysis.
Petitioners assert that Hewitt met the HCE requirements using the § 541.602 test to determine whether he was paid on the salary basis. Specifically, Petitioners argue that Hewitt’s payment plan satisfied all three prongs of § 541.602(a) because (1) Hewitt was paid every two weeks and therefore was paid on a weekly or less frequent basis, (2) he was paid a predetermined amount, since the amount always exceeded the weekly minimum of $455.00 per week, and (3) “the predetermined amount… was not subject to reduction because of variations in the quality or quantity of the work that Respondent performed.” Petition for Writ of Certiorari at 25, Helix Energy Solutions Grp. Inc. v. Hewitt, No. 21-984, (U.S. Filed January 7, 2022). Petitioner furthermore asserts that they were not required to meet the § 541.604 test to satisfy the “salary basis” requirement of the HCE test, which would pose the additional requirements that the employee receive a guaranteed weekly minimum salary regardless of time worked, and that a “reasonable relationship exists between the guaranteed amount and the amount actually earned.” 29 C.F.R. § 541.604. They state that § 541.601 is a “standalone and streamlined” test, and further, that finding that the § 541.604 requirements must also be met for employees paid daily creates a circuit split with the First and Second Circuits, which, they argue, have not incorporated this test. Brief for Petitioners at 13, 26.
Respondent argues that Petitioner fails to meet the salary basis requirement under both 29 C.F.R. § 541. 602 and § 541.604. Addressing § 541.602 first, Respondent states: “Petitioners failed to provide any facts demonstrating that they paid Respondent a “predetermined” or “guaranteed” pay rate on a “weekly, or less frequent basis” as required by § 541.602(a). Petitioners paid Respondent “with” and not “without” regard to the number of days he worked, which § 541.602(a)(1) disallows. Petitioners also maintained the right to reduce Respondent’s pay based on the quality of his work in violation of 29 C.F.R. § 541.602(a). (ROA.209:61:6-9).” Respondent. Brief in Opposition at 13. Respondent further argues that the Fifth Circuit properly applied the additional requirements set out in § 541.604, but even if they did not, “it is of no consequence” since Petitioner failed to comply with the salary basis test in § 541.602. Id. at 20.
The Southern District of Texas agreed with Respondent that Hewitt was an HCE, and Hewitt appealed to the Fifth Circuit. The Fifth Circuit sitting en banc reversed in a 12-6 decision, stating that Helix was required to demonstrate that it complied with § 541.604 to meet the “salary basis” test in 29 C.F.R. § 541.601 to claim an exemption, since Hewitt was paid daily. Hewitt v. Helix Energy Solutions Group, Inc., 15 F.4th 289, 292 (5th Cir. 2021). (“If we are following the plain text of the regulations, that should be the end of the story”). The Fifth Circuit stated that this approach was aligned with that of the Sixth and Ninth Circuits, as well as the Department of Labor. See id. The court concluded that Helix did not comply with § 541.604 and therefore did not meet the “salary basis requirement,” because Hewitt was not guaranteed a minimum weekly wage and did not show that “a reasonable relationship existed between the guaranteed amount and the amount actually earned” in accordance with § 541.604. Furthermore, the court stated that no split was created with the First and Second Circuits in contrast with Petitioner’s argument, because in those cases the employees were paid on a weekly, not a daily basis.
Helix now petitions for certiorari to the United States Supreme Court. The case will have major implications for workers who, like Respondent Hewitt, earn six figures, but are paid on a daily or a shift basis such as nurses and technicians.
