Dean v. Newsco International Energy Services, USA, Inc.

□ Southern District of Texas

ENTERED

August 06, 2019

IN THE UNITED STATES DISTRICT COURT David J. Bradley, Clerk

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

DAVID DEAN, et al., §

§

Plaintiffs, §

VS. § CIVIL ACTION NO. 4:15-CV-03406

§

NEWSCO INTERNATIONAL ENERGY §

SERVICES, USA, INC., §

§

Defendant. §

ORDER

Before the Court are Plaintiffs’ Notice of Motion for Partial Summary Judgment [ECF No.

58], their Memorandum in Support [ECF No. 58-1], and Defendant’s Response [ECF No. 62].

Also before the Court are Defendant’s Motion for Summary Judgment and, in the Alternative,

Motion for Partial Summary Judgment [ECF No. 48], Plaintiffs’ Memorandum in Opposition

[ECF No. 56], and Defendant’s Supplement to its Motion for Summary Judgment and Supplement

to its Response in Opposition to Plaintiffs’ Motion for Partial Summary Judgment [ECF No. 66].

Having considered the Motions, the responses, the replies, the summary judgment

evidence, the applicable law, and the supplemental briefing from the Parties, the Court decides,

for the reasons set forth below, that Plaintiffs’ Motion for Partial Summary Judgment [ECF No.

58] be DENIED and that Defendant’s Motion for Summary Judgment and, in the Alternative, for

Partial Summary Judgment [ECF No. 48] be DENIED.

I. Background Facts

Plaintiffs David Dean (“Dean”), Bennett Joerger (“Joerger”), and Larry Dore (“Dore”) are

Directional Drillers that worked for Newsco International Energy Services, USA, Inc. (hereinafter

“Newsco” or “Defendant”).! As such it was their job on various oil well drill sites to perform

directional drilling services. Plaintiffs brought this action seeking unpaid overtime under the Fair

Labor Standards Act (“FLSA”), claiming they worked 12-hour days for weeks at a time and were

not paid overtime wages.

Defendant concedes that Plaintiffs were not paid overtime and, while it differs with

Plaintiffs significantly regarding how frequently Plaintiffs worked overtime, it also concedes that

there were occasions when Plaintiffs worked in excess of 40-hour weeks. Defendant claims that

Plaintiffs were not entitled to overtime because, among other defenses, they are exempt from the

FLSA as highly compensated executive and/or administrative employees. More specifically,

Defendant claims the following:

The undisputed evidence establishes that Plaintiffs were exempt employees who,

among other things:

e Made over $100,000 pro rata compensation during each year they worked

for Newsco;

e Did not perform any significant manual labor;

e Supervised the work of all field personnel on every single job site;

e Performed primary duties that included performance of office or non-

manual work; and

e Performed primary duties that required them to exercise discretion and

independent judgment with respect to matters of great significance both to

Newsco, and to its clients.

The undisputed evidence further establishes that, even if Plaintiffs were not exempt

employees, their damages, if any, should be calculated using the fluctuating

workweek method of calculating damages because:

e Their hours fluctuated from week to week;

e They received a fixed salary that did not vary with the number of hours

worked during the week;

e Their fixed salary was sufficient to provide compensation for each week at

a regular rate that at least equaled the minimum wage; and

e They had a “clear and mutual understanding” that Newsco would pay the

fixed salary regardless of the number of hours worked.

' Plaintiffs Dean, Joerger, and Dore will frequently be collectively referred to as “Plaintiffs.” Scott Warner, who was

also previously a plaintiff, has indicated his unwillingness to proceed with this suit and will be addressed on a separate

basis.

[ECF No. 48, p. 2].

Plaintiffs counter:

First, Defendant’s administrative exemption fails as a matter of law because

Defendant cannot prove either one of the “job duties” prongs of the defense. To

satisfy the first primary duty prong of the administrative exemption, Defendant

must prove that Plaintiffs’ directional drilling duties are directly related to running

Newsco’s business itself or determining its overall policies rather than producing

the commodity Newsco provides to the marketplace. Newsco cannot meet its

burden of proof, however, because it is in the business of providing directional

drilling services, and Plaintiffs are the ones actually performing this service to the

marketplace. Plaintiffs are exactly the type of “front-line” employee who is outside

the scope of the administrative exemption. Newsco cannot establish the second

prong of the administrative exemption defense either because this record

establishes that Plaintiffs’ primary job duty—while important to Newsco—does not

require them to exercise discretion and independent judgment with respect to

matters of significance.

Second, Defendant’s executive exemption defense fails as a matter of law as well.

Despite the well-developed factual record establishing that directional drilling is

Plaintiffs’ primary job duty, Defendant remarkably contends that Plaintiffs were

high-level managers and that their primary job duty is management. This argument

is unsupported by the facts. Defendant incorrectly attributes managerial duties to

Plaintiffs that the undisputed record confirms they simply did not have. Because of

this, Defendant cannot meet its heavy burden of proof on its executive exemption

defense.

k OF Ok

Defendant also claims the highly-compensated and/or combination exemption

applies, but because Defendant cannot prove as a matter of law that Plaintiffs’

primary duty of directional drilling and executing the well plan satisfies any of the

primary duty requirements of the executive or administrative exemptions, it cannot

satisfy the requirements of these exemptions either. 29 C.F.R. § 541.601; 29 C.F.R.

§ 541.708.

[ECF No. 58-1, pp. 1-2] (emphasis in original).

The Court first presents the relevant facts agreed to by the Parties before turning to their

respective factual contentions and the Court’s analysis.

A. Agreed Factual Background: Newsco’s Business

Newsco is a drilling services company that provides directional drilling expertise and

services to oil and gas companies. It operates as a third party on drill sites that are owned or

operated by its clients. Part of its services to clients includes providing equipment and personnel

to perform directional drilling.

Directional drilling is steering a well bore to drill a well, usually at some kind of non-

perpendicular angle. In order to steer the drill toward oil underground, the directional drilling team

follows a “well plan,” which consists of the location of the target oil reservoir and plans to reach

it by drilling. The process involves techniques called “rotating” and “sliding.” “Rotating” is

drilling while the drill pipe spins. “Sliding” is steering the direction of the drill bit and pipe. As

one of the Plaintiffs described it, what the Directional Driller is “doing at the end is making sure

that that bit is going . . . [in] the right direction to get you closer to where you need to be.” [ECF

No. 58-1, Ex. E, Joerger Dep. 112:8-23].

The process of directional drilling involves two primary types of employees which Newsco

provides to its clients at the drilling site: Directional Drillers and Measurement While Drilling

(“MWD”) operators. Directional Drillers are the employees responsible for steering the drill

underground toward the oil and making sure that it is following the well plan. [ECF No. 58-1, Ex.

B, Newsco0000243, -286]. MWDs assemble, install, and monitor survey equipment used to

generate data, such as well bore direction and angle, which, in turn, is provided to the Directional

Drillers to aid them in steering underground. [/d. at -287]. Directional Drillers use the data

provided by MWDs to compare the survey data to the client’s well plan to determine where the

drill is located underground and where it needs to go to reach the target. [Jd. at -286].”

2 The Parties dispute the hierarchy, if any, into which Directional Drillers and MWDs fall, as will be discussed in

greater detail later. Briefly, Plaintiffs claim that although the positions work together on drilling sites, they fall within

B. Background of the Plaintiffs

As one might gather from the foregoing, the Plaintiffs and the Defendant agree on very

little. They both agreed that Plaintiffs, during the time in question, made more than $100,000

annually (on a pro rata basis), and they both appear to agree that the job of a Directional Driller is

not one that should be characterized as manual labor. The majority of the remaining case-

controlling facts are disputed. In fact, one wonders how the daily work of directional drilling ever

got done given the contrary views that the Parties hold about the duties of a Directional Driller.

1. Larry Dore

Plaintiff Dore started working on a drilling rig the day after he graduated from high school

in 1974. He worked his way up the drilling rig hierarchy until after five years, he was a drilling

operator. In the following years, depending on the shape of the oil industry, he either worked on

rigs or in unrelated industries. In 2009, after years of being a drilling operator, he applied with and

was hired by Halliburton to be a Directional Driller. He went through its training program which

included, among other things, months of “on the job” training.

Sometime later Dore was recruited by Newsco. He made $100,00 per year (at least on a

pro rata basis) while working for Newsco.

2. Bennett Joerger

Bennett Joerger went to the University of Oklahoma from which he graduated in 2010.

After his formal education, he was hired by Weatherford as an MWD. He remained there until

2012 when he jumped both companies and job responsibilities to take a job at Archer Drilling

separate disciplines and management silos; that is, they report to different chains of command rather than one to the

other. [ECF No. 58-1, at 6; see also ECF No. 58-1, Ex. F, Corp. Rep. Dep. 20:4-21; ECF No. 58-1, Ex. D, Heaton

Dep. 11:9-14, 12:11-18; ECF No. 58-1, Ex. E, Joerger Dep. 145:9-12; ECF No. 58-1, Ex. G, Dore Dep. 32:14-16].

lah also contend that “there is no formal requirement for MWDs to report to Directional Drillers.” [ECF No. 58-

Services as a Directional Drilling trainee. As Halliburton did with Dore, Archer prepared Joerger

through an in-house training program until he was deemed sufficiently proficient to work on his

own. Unfortunately for Joerger, a few months after being trained, Archer went out of business.

Joerger then returned to Weatherford where after a brief training period he operated as a

Directional Driller. Eventually, he was recruited to Newsco by some of his former co-workers.

Being sufficiently trained by Archer and Weatherford, he jumped directly into the field as a

Directional Driller at Newsco. He, too, made $100,000 per year on a pro rata basis.

3. David Dean

Dean worked in the oil patch for a good part of his life. In 1999, he was a Pump Operator,

and three years later he became a hydrostatic tester. He left the oil business for a year or so but

returned soon thereafter as a floor hand. He then became an MWD at Scientific Drilling. Thereafter

he jumped to Nevis Energy as a Directional Driller trainee. He described this period as almost

entirely consisting of on-the-job training.

He worked as a Directional Driller for five more companies before landing at Newsco.

Like Dore and Joerger, he made $100,000 (on a pro rata basis) annually at Newsco.

C. Contentions of the Parties

Simply put, Plaintiffs complain that they worked over 40 hours per week and were not paid

overtime. That being the case, Plaintiffs claim Newsco violated the FLSA and is obligated to pay

damages to remedy the situation.

Newsco contends that Plaintiffs were exempt employees and thus, it was not required to

pay Plaintiffs overtime. It claims that all three Plaintiffs knew at the time they were hired that they

would be making a salary ($4,000 per month) plus a day rate ($750 for Dean, $600 for Joerger and

Dore) regardless of the number of hours they worked. As such, Newsco maintains that the

Plaintiffs were highly compensated and were therefore exempt from the overtime protections of

the FLSA. Further, Defendant claims that all three Plaintiffs were covered by the administrative,

executive, highly compensated, and/or combination exemptions as provided for by the FLSA. If

an individual is exempt, his/her employer need not pay that employee overtime.

Il. Legal Standard

Summary judgment is warranted “if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. Civ. P.

56(a). Once a movant submits a properly supported motion, the burden shifts to the nonmovant to

show that the court should not grant the motion. Celotex Corp. v. Catrett, 477 U.S. 317, 321-25

(1986). The nonmovant then must provide specific facts showing that there is a genuine dispute.

Id. at 324; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A dispute

about a material fact is genuine if “the evidence is such that a reasonable jury could return a verdict

for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The court

must draw all reasonable inferences in the light most favorable to the nonmoving party in deciding

a summary judgment motion. /d. at 255. The key question on summary judgment is whether a

hypothetical, reasonable factfinder could find in favor of the nonmoving party. /d. at 248.

“When summary judgment is sought on an affirmative defense, as here, the movant ‘must

establish beyond peradventure al/ of the essential elements of the claim or defense to warrant

judgment in his favor.’” Dewan v. M-I, L.L.C., 858 F.3d 331, 334 (5th Cir. 2017) (quoting Fontenot

v. Upjohn Co., 780 F.2d 1190, 1194 (Sth Cir. 1986)). “Once the movant does so, the burden shifts

to the nonmovant to establish an issue of fact that warrants trial.” Smith v. Reg’] Transit Auth. □ 827

F.3d 412, 420 n.4 (Sth Cir. 2016). The burden of proof regarding exempt status is on the employer.

Owsley v. San Antonio Indep. Sch. Dist., 187 F.3d 521, 523 (5th Cir. 1999). In a case involving

FLSA exemptions, those exemptions must be given a “‘fair reading,’ as opposed to the narrow

interpretation previously espoused by [the Fifth Circuit] and other circuits.” Carley v. Crest

Pumping Techs., L.L.C., 890 F.3d 575, 579 (5th Cir. 2018) (quoting Encino Motorcars, LLC v.

Navarro, -- U.S. --, 138 S.Ct. 1134, 1142 (2018); see also Amaya v. NOYPI Movers, L.L.C., 741

F. App’x 203, 204-05 (5th Cir. 2018).3

In considering the evidence presented by the parties, the Fifth Circuit has made clear that

“unsubstantiated assertions are not competent summary judgment evidence” and that “[s]ummary

judgment . . . may be appropriate, even in cases where elusive concepts such as motive or intent

are at issue, .. . if the nonmoving party rests merely upon conclusory allegations, improbable

inferences, and unsupported speculation.” Forsyth v. Barr, 19 F.3d 1527, 1533 (Sth Cir. 1994);

Krim v, BancTexas Grp., Inc., 989 F.2d 1435, 1449 (Sth Cir. 1993).

Ill. Applicable Law

Under the FLSA, employers must pay their employees overtime wages if those employees

work more than 40 hours a week. See 29 U.S.C. § 207(a) (requiring employers to compensate

covered employees “at a rate not less than one and one-half times the [employee’s] regular rate”

for hours worked in excess of 40 hours per week). The overtime provisions do not apply, however,

to employees exempted by Section 213. See 29 U.S.C. § 213 (“The provisions of section [] . . . 207

of this title shall not apply with respect to-- (1) any employee employed in a bona fide executive,

administrative, or professional capacity ....”). To determine whether the Section 213 exemptions

apply, courts quite frequently turn to the Department of Labor (“DOL”) regulations interpreting

3 The Parties have filed supplemental briefing regarding the significance of the Encino decision on the level of scrutiny

to be applied by this Court in considering how to read the Secretary’s list of exemptions. The Court finds that, as the

Fifth Circuit has already adequately addressed the effects of Encino, it need not address the Parties’ briefing in greater

detail and instead will follow the binding precedent by providing a “fair reading” of the exemptions. See Carley, 890

F.3d at 579; Amaya, 741 F. App’x 204-05; Encino, 138 S.Ct. at 1142.

the FLSA for guidance. Vela v. City of Houston, 276 F.3d 659, 667 (Sth Cir. 2001). “The

[Department of Labor] is authorized to promulgate rules interpreting and clarifying the FLSA’s

administrative and professional exemption.” Clark v. Centene Co. of Tex., L.P., 656 F. App’x 688,

690 (Sth Cir. 2016) (per curiam). The Fifth Circuit has repeatedly deferred to these administrative

regulations in cases involving these overtime exemptions. See Vela, 276 F.3d at 667 (“This court

must defer to these DOL regulations if (as all parties impliedly concede) they are ‘based on a

permissible construction of the statute.’””) (quoting Chevron U.S.A. Inc. v. Nat. Res. Def. Council,

Inc., 467 U.S. 837 (1984)).

In the instant case, Newsco has pleaded as affirmative defenses that it was not obligated to

pay Plaintiffs overtime because they fell into the administrative, executive, highly compensated,

and combination exemptions of the FLSA. In FLSA classification cases, the employer bears the

burden of proving an overtime-pay exemption applies. 7yler v. Union Oil Co. of Cal., 304 F.3d

379, 402 (5th Cir. 2002). The Court therefore lays out the statutory and regulatory framework for

each of these exemptions before addressing the Parties’ contentions regarding what limitations

period and damages calculation method should apply to the instant case.

A, Administrative Exemption

“For the administrative exemption to apply, the employee must be one (1) who is

‘[c]ompensated on a salary or fee basis at a rate of not less than $455 per week;’ (2) ‘[w]hose

primary duty is the performance of office or non-manual work directly related to the management

and general business operations of the employer or the employer’s customers;’ and (3) ‘[w]hose

primary duty includes the exercise of discretion and independent judgment with respect to matters

of significance.’” Dewan, 858 F.3d at 334 (quoting 29 C.F.R. § 541.200). The administrative

exemption has been broadly fleshed out through examples in the regulations and caselaw.

The Fifth Circuit, in addressing when the administrative exemption applies, has described

the test for an employee’s “primary duty” as follows:

Section 541.103 of the interpretations defines “primary duty” with respect to all

three exemptions. It provides that, while “[iJn the ordinary case it may be taken as

a good rule of thumb that primary duty means the major part, or over 50 percent,

of the employee’s timef,] time alone . . . is not the sole test.” Exempt work may be

an employee’s primary duty even though such work occupies less than half her time

“if the other pertinent factors support such a conclusion.” Precisely what those

factors are depends on upon which exemption is being claimed, but for each the

essence of the test is to determine the employee’s chief or principal duty . . . [T]he

employee’s primary duty will usually be what she does that is of principal value to

the employer, not the collateral tasks that she may also perform, even if they

consume more than half her time.

Dalheim v. KDFW-TV, 918 F.3d 1220, 1227 (Sth Cir. 1990) (internal citations omitted). If

employees “are closely supervised and earn little more than the nonexempt employees, they

generally do not satisfy the primary duty requirement.” Villegas v. Dependable Constr. Servs.,

Inc., No. 4:07-cv-2165, 2008 WL 5137321, at *6 (S.D. Tex. Dec. 8, 2008) (citing 29 C.F.R. §

541.700(c)). The Fifth Circuit has reiterated that the amount of time devoted to particular work

duties is not the sole test and that a finding that the majority of an employee’s time “was not spent

[on exempt tasks] . . . did not preclude the determination that [his] primary duties consisted of the

administration of the general business operations . . . such that the administrative and supervisory

duty performed by [the employee] were of principal importance to [the employer], as opposed to

those collateral tasks which may have taken more than fifty percent of [his] time.” Lott v. Howard

Wilson Chrysler-Plymouth, Inc., 203 F.3d 326, 332 (5th Cir. 2000).

The Fifth Circuit has also clarified what “directly related’’ means:

The Secretary’s interpretation, § 541.205(a), defines the “directly related” prong by

distinguishing between what it calls “the administrative operations of a business”

and “production.” Administrative operations include such duties as “advising the

management, planning, negotiating, representing the company, purchasing,

promoting sales, and business research and control.” Work may also be “directly

related” if it is of “substantial importance” to the business operations of the

10

enterprise in that it involves “major assignments in conducting the operations of the

business, or . . . affects business operations to a substantial degree.”

Dalheim, 918 F.3d at 1230 (internal citations omitted). The term “substantial importance,”

however, is not meant to signify that a worker’s performance may cause significant profits or

losses. Jd. at 1231 (‘An employee’s job can even be indispensable and still not be of the necessary

substantial importance to meet the directly related element.’ In assessing whether an employee’s

work is of substantial importance, it is necessary yet again to look to ‘the nature of the work, not

its ultimate consequence.’”) (citing Clark v. J.M. Benson Co., 789 F.2d 282, 287 (4th Cir. 1986)).

The Secretary has explained through the regulations that differentiating between

administrative operations and production is a key inquiry in determining whether an employee’s

work is “directly related to the management and general business operations of the employer or

the employer’s customers.” 29 C.F.R. §§ 541.201(a), (b). “[W]here an employee is primarily

involved in producing the product of the company rather than ‘servicing’ the company, the

administrative exemption does not apply.” Villegas, 2008 WL 5137321, at *7. “Work directly

related to management or general business operations includes, but is not limited to, work in

functional areas such as . . . accounting; budgeting; auditing; . . . quality control; purchasing;

procurement; . . . safety and health; personnel management; human resources; . . . government

relations .. . legal and regulatory compliance; and similar activities.” 29 C.F.R. § 541.201(b).

Regarding the next factor, the exercise of discretion and independent judgment, the Fifth

Circuit has stated that the administrative exemption “also requires that an employee exercise

discretion and independent judgment with respect to matters of significance, which ‘involves the

comparison and the evaluation of possible courses of conduct, and acting or making a decision

after the various possibilities have been considered.’” Zannikos v. Oil Inspections (USA), Inc., 605

F. App’x 349, 354 (Sth Cir. 2015) (quoting 29 C.F.R. § 541.202(a)). Although an employee does

11

not need to exercise final decision-making authority to meet this standard, exercising discretion

requires “more than the use of skill in applying well-established techniques, procedures or specific

standards described in manuals or other sources.” 29 C.F.R. §§ 541.202(c), (e); Cheatham v.

Allstate Ins. Co., 465 F.3d 578, 585 (Sth Cir. 2006) (holding that an employee may exercise

discretion even if his or her decisions or recommendations are reviewed by senior management

and occasionally revised or reversed). Employees may still exercise discretion and independent

judgment if they consult manuals or guidelines to perform their work. Cheatham, 465 F.3d at 585.

The Secretary has laid out a list of ten non-exhaustive factors that courts often consider when

making the determination whether an employee exercises the requisite discretion:

Factors to consider when determining whether an employee exercises discretion

and independent judgment with respect to matters of significance include, but are

not limited to: whether the employee has authority to formulate, affect, interpret, or

implement management policies or operating practices; whether_the employee

carries out major assignments in conducting the operations of the business; whether

the employee performs work that affects business operations to a substantial degree,

even if the employee’s assignments are related to operation of a particular segment

of the business; whether the employee has authority to commit the employer in

matters that have significant financial impact; whether the employee has authority

to waive or deviate from established policies and procedures without prior

approval; whether the employee has authority to negotiate and bind the company

on significant matters: whether the employee provides consultation or expert advice

to management; whether the employee is involved in planning long- or short-term

business objectives; whether the employee investigates and resolves matters of

significance on behalf of management; and whether the employee represents the

company in handling complaints, arbitrating disputes or resolving grievances.

29 C.F.R. § 541.202(b) (emphasis added).

In an FLSA case also involving a similar type of employee (mud engineer) on oil drilling

sites, the Fifth Circuit reversed the district court’s grant of summary judgment for the employer,

despite the fact that summary judgment evidence established that the employees worked closely

with company men, continually monitored the quality of drilling fluids and muds, allegedly

oversaw other company employees on the drilling site, and allegedly used discretion and

12

independent judgment to implement the drilling plan. See Dewan, 858 F.3d at 337. It found that

fact issues existed as to the administrative exemption with regard to whether the mud engineers’

“work could be classified as office or non-manual work directly related to the general business

operations of [the employer’s] customers,” as Plaintiffs had presented enough evidence for a jury

to find that some of their work might involve manual labor and production, rather than servicing

the business operations. /d. at 337-38. The Court further found that Plaintiffs’ lack of involvement

in developing the well plan and their option of deviating from the well plan as needed to meet

changing drilling conditions raised a fact issue as to whether they exercised discretion and

independent judgment in the course of their work. /d. at 338-40. Although the facts differ slightly

between that case and the instant one, both involve the same underlying questions regarding the

primary duties of the employees and whether the employees exercised independent judgment and

discretion in those roles.

With these considerations in mind, the Court turns to the legal question: whether the

Plaintiffs fall within the FLSA’s administrative exemption. In this case, the determination requires

consideration of whether Plaintiffs’ primary duty was “the performance of office or non-manual

work directly related to the management or general business operations of the employer or the

employer’s customers” and whether their primary duty “includes the exercise of discretion and

independent judgment with respect to matters of significance.”* See 29 C.F.R. § 541.200(a). As

stated above, in a similar dispute regarding mud engineers employed by a drilling company, the

Fifth Circuit observed that this “‘ultimate determination, however, relies on many factual

determinations that can be resolved by a jury.’” Dewan, 858 F.3d at 334 (quoting Singer v. City of

4 Plaintiffs concede that they each meet the salary requirement for the administrative exemption, as the undisputed

summary judgment evidence shows that each Plaintiff earned a base salary of no less than $455 per week. Since there

is no dispute regarding the first prong of the exemption, the Court does not address it further.

13

Waco, Tex., 324 F.3d 813, 818 (Sth Cir. 2003)). Part of the consideration involves the amount of

time that the Plaintiffs devoted to particular duties, as well as the significance of those duties. Jd.

(citing Zannikos, 605 F. App’x at 352). While there are some shared facts provided by the Parties,

the inferences that the Parties argue that the Court should draw from them vary widely with regard

to Plaintiffs’ supervision of other employees and exercise of judgment or discretion in directional

drilling and implementing the well plan. “[T]he drawing of legitimate inferences from the facts are

jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or for

a directed verdict.” Anderson, 477 U.S. at 255.

The Court declines to draw those inferences without the involvement of a jury. See Dewan,

858 F.3d at 335 (“[F]actual issues such as identifying these employees’ primary duties, or deciding

if they exercised independent judgment and discretion, cannot be resolved without making

inferences from the evidence that are subject to genuine dispute. Those interpretations cannot be

said on this record to be resolvable on summary judgment.”). Accordingly, the Court will not grant

summary judgment for either Party with regard to the administrative exemption. The Court

concludes that it is necessary to examine the two contested criteria separately and examines each

to show the extent of the fact-finding needed before a jury.

1. Work “Directly Related” to “Management or General Business Operations”

As previously explained, the regulations define an employee’s “primary duty” as the

“principal, main, major or most important duty that the employee performs.” 29 C.F.R. §

541.700(a). “The ‘directly related’ test is met by the employee’s ‘assisting with the running or

servicing of the business, as distinguished, for example from working on a manufacturing

production line or selling a product in retail or service establishment.’ § 541.201(a). Under that

14

inquiry, it is ‘the type of work performed by the employee’ on which we must focus. Id.” Dewan,

858 F.3d at 335.

Like the plaintiffs in Dewan, Plaintiffs argue and provide summary judgment evidence to

the effect that the type of work they performed was fundamentally different from the examples

laid out in the regulations, where the examples of work “directly related to management or general

business operations” include human resources, marketing, quality control, safety and health, etc.

29 C.F.R. § 541.201(b). In another section, the regulation entitled “Administrative exemption

examples” includes insurance-claim adjusters, financial-services employees, and human-resource

managers. 29 C.F.R. § 541.203.

In particular, similar to the arguments made in Dewan, Plaintiffs concede that their work

involves producing income-generating services that are central to Newsco’s business model, but

Plaintiffs argue that they are more analogous to oil-well drillers, which are included in a Labor

Department list of “Blue Collar Occupations That Are Most Likely Nonexempt.” See Defining

and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and

Computer Employees, 69 Fed. Reg. 22,122, 22,242 (Apr. 23, 2004) (as codified at 29 C.F.R. pt.

541).

This query highlights the need for clarity between work which has as its primary duty the

provision or production of a commodity, whether goods or services, to the marketplace and work

which has as its primary duty the administering of business affairs of the employer’s enterprise.

See Dalheim, 918 F.2d at 1230. In reviewing this issue, the Fifth Circuit has noted that this line is

sometimes blurred in modern workforces, “particularly given that the item being produced . . . is

often an intangible service rather than a material good.” Dewan, 858 F.3d at 336 (quoting Davis v.

J.P. Morgan Chase & Co., 587 F.3d 529, 532 (2d Cir. 2009)). Here, the general business operations

15

of Newsco were supplying directional drilling to the oil industry. It is clear that directional drilling

is an essential part of Newsco’s business and the primary duty of the Directional Drillers.

Nevertheless, the distinction between “administering the business affairs of the enterprise” and

“producing the commodity” of the business must remain at the forefront of the Court’s analysis.

Datheim, 918 F.2d at 1230.

2. Disputed Facts

Plaintiffs have argued vehemently that they are not management or administrative

employees. Following the examples set out by C.F.R. § 254.205(a), they claim that they do not:

(1) Advise management,

(2) Plan and/or negotiate,

(3) Represent the company,

(4) Make purchases (other than on site incidental items such as food and small

office supplies),

(5) Promote sales, or

(6) Conduct business research and control.

Finally, they maintain that their jobs are not anything close to the examples of “insurance-claim

adjusters, financial-service employees, and human resources managers.” See 29 C.F.R. § 541.203.

Newsco’s briefing (and summary judgment evidence), in certain ways, contradicts that

supplied by Plaintiffs. It stresses that its main business is directional drilling and that the

Directional Drillers are the ones actually performing that task. It emphasizes that the Directional

Drillers are actually Newsco’s representatives on the site. Moreover, while each side disputes the

actual involvement of the “company man,” the undisputed evidence shows that a Directional

Driller’s work at a wellsite requires frequent contact with the company men during an assignment.

Newsco maintains that regardless of the company man’s authority, it is the Directional Drillers

that are on site exercising judgment, making critical decisions, and are, at the very least, a

professional consultant to the company’s personnel. Plaintiffs, of course, contest this portrayal,

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claim they exercise little discretion, and maintain that they do exactly what the company man tells

them to do because it is his employer’s well.

The Court could detail each factor and each factual dispute ad infinitum, and there would

still be no way to resolve the Parties’ conflict. Interestingly, in many instances, the Parties agree

as to the basic facts, but differ on the conclusions to be drawn from those facts. The bottom line is

the Fifth Circuit has held in Dewan that the job of drawing conclusions and resolving competing

nuances is not to be done by the Court and instead must be reserved for the jury.

B. Executive Exemption

According to Defendant, Plaintiffs qualify as executives and thus would be exempt under

the FLSA if their job includes the criteria set out below:

e directs the work of employees;

® maintains production or sales records for use in supervision or control;

e appraises employees’ productivity and efficiency for the purpose of

recommending promotions or other changes in status;

e handles employee complaints and grievances;

e plans the work; determines the techniques to be used; apportions the work

among the employees; determines the type of materials, supplies,

machinery, equipment or tools to be used [;] . . . provides for the safety and

security of the employees or the property... .

As stated above, both sides “agree” that the Plaintiffs’ primary duty was to guide the

directional drilling process toward the goal set out by their client. Newsco paints this as a

management position and position of trust based upon the training and experience of each driller.

Plaintiffs, not surprisingly, paint the opposite picture and claim they possess no managerial

authority. Among the points of contradiction are:

(1) Plaintiffs claim they do not supervise anyone; Defendant claims they supervise

at least two MWDs at all times.

(2) Plaintiffs claim they do not have any hiring or firing authority, while Defendant

claims it routinely gave any recommendations made by the Directional Drillers

“particular weight.”

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The FLSA provides that an employee is exempt from over-time provisions under the

executive exemption if he/she (1) “[i]s compensated on a salary basis at a rate of not less than $455

per week”; (2) “[pJerforms a primary duty that consists of management of the enterprise in which

he is employed or of a customarily recognized department or subdivision thereof’; (3)

“[c]ustomarily and regularly directs the work of two or more other employees”; and (4) “[h]as the

authority to hire or fire other employees or whose suggestions and recommendations as to the

hiring, firing, advancement, promotion or any other change of status of other employees are given

particular weight.” 29 C.F.R. § 541.100(a).

To meet the standard for this exemption, the “primary duty” prong is defined by the

employee’s “management of the enterprise.” That an employee often performs non-management

tasks does not necessarily preclude a finding of exempt status. See Gellhaus v. Wal-Mart Stores,

Inc., 769 F. Supp. 2d 1071, 1080 (E.D. Tex. Mar. 10, 2011) (finding that although the record did

not disclose how much of her time was spent on managerial tasks, the record strongly suggested

that more than half of her time was devoted to clearly managerial tasks in order to satisfy the

executive exemption) (citing Rainey v. McWane, Inc., 552 F. Supp. 2d 626, 630 (E.D. Tex. 2008)

“(‘[E]vidence that some [p]laintiffs spent time performing manual labor does not raise a genuine

issue of material fact as to whether [p]laintiffs primary duty was management.’); Mims{ v.

Starbucks Corp., No. H-05-0791, 2007 WL 10369,] at *8 [(S.D. Tex. Jan. 2, 2007)] (finding

plaintiffs exempt despite the fact that they spent less than fifty percent of their time on management

tasks); Kastor v. Sam’s Wholesale Club, 131 F. Supp. 2d 862, 866-67 (N.D. Tex. 2001) (granting

summary judgment in favor of employer where the purpose of plaintiff's employment was

managerial even though he spent ninety percent of his time on non-exempt tasks).”).

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Some courts in this circuit have added additional factors to consider where non-managerial

tasks comprise less than fifty percent of the employee’s work duties to determine whether his/her

primary duty is management: “(1) the relative importance of managerial duties compared to other

duties; (2) the frequency with which the employee makes discretionary decisions; (3) the

employee’s relative freedom from supervision; and (4) the relationship between the employee’s

salary and the wages paid to employees who perform relevant non-exempt work.” Gellhaus, 769

F. Supp. 2d at 1081; Mims, 2007 WL 10369, at *4 (citing 29 C.F.R. § 541.700(a)).

The regulations provide examples of what type of tasks “management of the enterprise”

might entail, such as

interviewing, selecting, and training of employees; setting and adjusting their rates

of pay and hours of work; directing the work of employees; maintaining production

or sales records for use in supervision or control; appraising employees’

productivity and efficiency for the purpose of recommending promotions or other

changes in status; handling employee complaints and grievances; disciplining

employees; planning the work; determining the techniques to be used; apportioning

the work among the employees; determining the type of materials, supplies,

machinery, equipment or tools to be used or merchandise to be bought, stocked and

sold; controlling the flow and distribution of materials or merchandise and supplies;

providing for the safety and security of the employees or the property; planning and

controlling the budget; monitoring or implementing legal compliance measures.

29 C.F.R. § 541.102.

The regulations also state that an employee can meet this second prong through the

management of “a customarily recognized department or subdivision thereof.” See id §

541.100(a). The regulation distinguishes between a “collection of employees assigned from time

to time to a specific job or series of jobs and a unit with permanent status and function. A

customarily recognized department or subdivision must have a permanent status and a continuing

function.” /d. § 541.103. The regulation provides, as an example, that “‘a large employer’s human

resources department might have subdivisions for labor relations, pensions and other benefits,

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equal employment opportunity, and personnel management, each of which has a permanent status

and function.” /d. A recognized department or subdivision may move from place to place and the

subordinate personnel may change, as long as the unit has a continuing function. Jd. § 541.103(d)

(“Continuity of the same subordinate personnel is not essential to the existence of a recognized

unit with a continuing function.”); Allen v. Coil Tubing Servs. LLC, 846 F. Supp. 2d 678, 708 (S.D.

Tex. 2012) (“A recognized department or subdivision may move from place to place and the

subordinate personnel may change, as long as the ‘unit’ has a continuing function.’).

Additionally, executive employees make suggestions and recommendations regarding

employees whom the executive “customarily and regularly directs.” 29 C.F.R. § 541.105.

Customarily and regularly includes “work normally and recurrently performed every workweek;

it does not include isolated or one-time tasks.” Jd. § 541.701. This prong requires showing that the

employee “customarily and regularly directs the work of” at least two other employees. /d. §

541.100(a); Chambers v. Sodexo, Inc., 510 F. App’x 336, 339 (Sth Cir. 2013); Carranza v. Red

River Oilfield Servs., LLC, No. H-15-3631, 2017 WL 387196, at *4 (S.D. Tex. Jan. 25, 2017).

Finally, the last prong requires that exempt executive employees have authority to hire or

fire other employees or that his/her recommendations be given particular weight.

To determine whether an employee’s suggestions and recommendations are given

“particular weight,” factors to be considered include, but are not limited to, whether

it is part of the employee’s job duties to make such suggestions and

recommendations; the frequency with which such _ suggestions and

recommendations are made or requested; and the frequency with which the

employee’s suggestions and recommendations are relied upon. Generally, an

executive’s suggestions and recommendations must pertain to employees whom the

executive customarily and regularly directs. It does not include an occasional

suggestion with regard to the change in status of a co-worker. An employee’s

suggestions and recommendations may still be deemed to have “particular weight”

even if a higher level manager’s recommendation has more importance and even if

the employee does not have authority to make the ultimate decision as to the

employee’s change in status.

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29 C.F.R. § 541.105. An employee’s suggestions or recommendations may still have “particular

weight” even if a higher manager’s recommendation has more importance and even if the

employee does not make the ultimate determination. See id. Courts in this circuit have noted that

final decision-making authority were the test for determining whether a person was an

executive or administrative employee, one would rarely, if ever, qualify as such an employee under

the regulations.” Kastor, 131 F. Supp. 2d at 867. “Indeed, there is often a hierarchy in any

organization wherein supervisors have persons to whom they report, and the fact that an individual

does not have final supervisory authority does not take that person out of the realm of being a

manager in the organization.” Gellhaus, 769 F. Supp. 2d at 1082; see also Kastor, 131 F. Supp. 2d

at 868.

A sharp factual dispute exists with regard to the executive exemption. Again, both sides

agree on the compensation level of $455 per week for each plaintiff and, while the Plaintiffs have

conceded that they did not perform manual labor, they contest whether they performed any tasks

related to the management and general business operations of Newsco. They also contest that their

duties involved the exercise of discretion and independent judgment on any significant issues.

Plaintiffs have produced evidence that supports their position that they do not perform any

activities outlined in 29 C.F.R. § 541.102. For example, they claim they have not:

(1) Interviewed or selected an employee;

(2) Trained an employee;

(3) Set or adjusted pay or hours;

(4) Directed other employees;

(5) Maintained production and sales records for supervisory use;

(6) Appraised employees for promotion;

(7) Handled grievances;

(8) Disciplined employees;

(9) Planned the work;

(10) Determined the techniques to use;

(11) Apportioned the work among employees;

(12) Determined the type of materials to use or buy;

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(13) Controlled the flow of materials;

(14) Handled the safety and security of employees or property;

(15) Planned or controlled the budget; or

(16) Monitored or insured legal compliance.

Moreover, they maintain their primary duty of directing the drill to the designated target is totally

non-managerial and involves little or no discretion.

Newsco’s argument emphasizes that the Directional Drillers were its representatives on the

drill sites and that they were the individuals making the key critical decisions. Newsco contends

that Directional Drillers supervise the team of MWDs assigned to the well site and could (and

occasionally did) make hiring and firing recommendations. Moreover, while each side paints a

different picture of the role of the “company man,” Newsco maintains that regardless of how one

views his/her role on the drill site, the Directional Drillers are certainly the face of the company

acting as consultants (using their training, experience, and judgment) to the company man.

Conversely, Plaintiffs claim they merely do what the company man tells them to do.

This Court could conduct a detailed analysis of the factors and the underlying factual

dispute and describe each conclusion that could be drawn from the facts, but such an analysis in

this situation would be superfluous. Based upon the controlling Fifth Circuit precedent and the

summary judgment evidence, the ultimate conclusion is that the interpretation of these facts must

be made by a jury.

C. Highly Compensated Employee Exemption

Without belaboring the points in consideration, the Court—especially since it is constricted

by the dictates of Dewan—will briefly discuss the relevant contentions.

“The FLSA provides that ‘[aJn employee with total annual compensation of at least

$100,000 is deemed exempt . . . if the employee customarily and regularly performs any one or

more of the exempt duties or responsibilities of an executive, administrative or professional

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employee ....’” Zannikos, 605 F. App’x at 359 (quoting 29 C.F.R. § 541.601(a)). To qualify for

this exemption, the employee’s primary duties must include performing office or non-manual

work, 29 C.F.R. § 541.601(d). The employee need not meet all of the requirements of executive,

administrative, or professional employees to qualify for this exemption. See id. § 541.601(c). “A

high level of compensation is a strong indicator of an employee’s exempt status, thus eliminating

the need for a detailed analysis of the employee’s job duties.” Jd The $100,000 threshold can

include commissions and bonuses. See 29 C.F.R. § 541.601(b)(1). The monetary threshold is

satisfied for a year in which the employee works less than the full year if he/she is paid a pro rata

portion of the $100,000 based on the period of time he/she worked. See 29 C.F.R. § 641.601(b)(3).

Thus, if an employee who earns at least $100,000 annually also performs office or non-manual

work related to an employer’s business or that of its customers, the employee qualifies for the

highly compensated exemption and is not entitled to overtime pay.

Defendant claims that the Plaintiffs fall under the highly compensated employee

exemption. Setting aside the first element, the $100,000 annual pro rata pay requirement, which

all parties concede has been met, the Defendant argues that Plaintiffs do not perform manual labor

(a point also conceded by Plaintiffs in their briefing)° and the Plaintiffs regularly and customarily

performed at least one of the duties of an executive, administrative or professional employee. It is

this final factor over which the battle lines are drawn. Newsco claims the Plaintiffs meet all of the

executive requirements while Plaintiffs argue they meet none.

Newsco claims and has brought forth evidence that Plaintiffs:

(1) Direct the work of other employees;

(2) Maintain production or sales records for use in supervision or control;

(3) Appraise employees’ productivity/efficiency for the purpose of

recommending promotions or other change in status;

> In their briefing, Plaintiffs stated, “While this work does not involve manual labor, it similarly is not directly related

to management or the general business operations of Newsco.” (Doc. No. 58-1 at 19).

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(4) | Handle employee complaints and grievances; and

(5) Plan the work, determine the techniques to be used, determine the types of

materials, supplies, machinery, equipment or tools to be used and provide

for the safety and security of the employees or the property.

As detailed above, Plaintiffs have contested each of these factors such that the application

of this exemption, too, will need to be resolved by the jury.

The highly compensated employee exemption has its own exception for “blue-collar”

workers, as the exemption applies

only to employees whose primary duty includes performing office or non-manual

work. Thus, for example, non-management production-line workers and non-

management employees in maintenance, construction and similar occupations such

as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating

engineers, longshoremen, construction workers, laborers and other employees who

perform work involving repetitive operations with their hands, physical skill and

energy are not exempt under this section no matter how highly paid they might be.

29 C.F.R. § 541.601(d). Given the factual disputes and controlling precedent, this Court cannot,

as a matter of law, rule that either the highly compensated employee exemption or blue-collar

exception to that exception applies.

As the Court has already explained in detail in the preceding sections the issues of material

fact regarding the Plaintiffs’ primary duties for purposes of the administrative and executive

exemptions, it will not repeat that analysis here. The Court cannot reach a conclusion as a matter

of law on this exemption as long as issues of material fact remain. Consequently, the Court also

denies summary judgment with regard to both the Defendant’s claim as to the application of the

highly compensated exemption and the Plaintiffs’ claim as to the applicability of the blue-collar

exemption.

D. Combination Exemption

Newsco has also pleaded that Plaintiffs were exempt from overtime pay under the

combination exemption. That exemption provides that “[e]mployees who perform a combination

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of exempt duties as set forth in the regulations in this part for executive, administrative,

professional, outside sales and computer employees may qualify for exemption. Thus, for example,

an employee whose primary duty involves a combination of exempt administrative and exempt

executive work may qualify for exemption. In other words, work that is exempt under one section

of this part will not defeat the exemption under any other section.” 29 C.F.R. § 541.708. If it is not

clear that the employees performed exempt work, under either the administrative or executive

categories, as their primary duty, then the combination exemption cannot apply. See Dalheim, 918

F.2d at 1232. Given the overriding factual disputes that can only be resolved by trial, this Court

need not belabor the fact that it cannot decide this matter at the summary judgment stage.

E. Remaining Claims: FLSA’s Two-Year Statute of Limitations for Non-Willful

Violations and Fluctuating Work Week Method

“FLSA claims are subject to a two-year statute of limitations for ordinary violations and a

three-year period for willful violations.” Zannikos, 605 F. App’x at 360 (citing 29 U.S.C. § 255(a));

see also Singer, 324 F.3d at 821. The plaintiff bears the burden of demonstrating willfulness. Cox

v. Brookshire Grocery Co., 919 F.2d 354, 356 (Sth Cir. 1990). Mere knowledge of the FLSA and

its potential applicability does not suffice, nor does conduct that is merely negligent or

unreasonable. /d. (citing McLaughlin v. Richland Shoe Co., 486 U.S. 128, 132-33 (1988); Trans

World Airlines, Inc. v. Thurston, 469 U.S. 111, 127-28 (1985); Mireles v. Frio Foods, Inc., 899

F.2d 1407, 1416 (5th Cir. 1990)). The Supreme Court has explained an employer’s FLSA violation

is only willful if it “knew or showed reckless disregard for the matter of whether its conduct was

prohibited by the statute... .” McLaughlin, 486 U.S. at 133. The Fifth Circuit has further described

the importance of this precedent as follows:

An employer who “act[s] without a reasonable basis for believing that it was

complying with the [FLSA]” is merely negligent. [McLaughlin, 486 U.S.] at 134-

35, 108 S.Ct. 1677. So too is an employer who fails to seek legal advice regarding

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its payment practices. See id; Mireles, 899 F.2d at 1416. Willfulness has been

found when the evidence demonstrated that an employer actually knew that its pay

structure violated the FLSA or ignored complaints that were brought to its attention.

See lkossi-Anastasiou v. Bd. of Supervisors of La. State Univ., 579 F.3d 546, 553

n.24 (5th Cir. 2009).

Zannikos, 605 F. App’x at 360. Thus, an employer “is not acting willfully even if he fails to seek

legal advice on his payment method or acted unreasonably in violating FLSA.” Villegas, 2008 WL

5137321, at *26 (citing Mireles, 899 F.2d at 1416). Newsco contends it acted in good faith and

never willfully violated the FLSA. Conversely, Plaintiffs affirmatively seek a judgment that

Newsco did not act in good faith and willfully violated the FLSA.

Defendant also seeks summary judgment as to whether the fluctuating work week method,

which might eliminate or reduce the amount of damages, should control. Plaintiffs clearly oppose

its application.

Based upon the disputed facts above, this Court has already determined that the primary

issues must be determined by a jury. These ancillary issues, while important, are so intertwined

with the resolution of the major issues, and so factually intensive, that the Court finds it

inappropriate to attempt to carve out and resolve these issues on an incomplete record.

Therefore, this Court denies both the Defendant’s and Plaintiffs’ motions for summary

judgment on these issues. Regardless of how many exemptions, legal issues, factual controversies,

or arguments one reviews in this case, there is either a dispute as to the controlling facts or, if the

parties agree on the facts, a dispute over what conclusions can be drawn from the agreed upon

facts. Unfortunately, such a stalemate spells doom for both summary judgment motions, especially

where one considers the controlling Fifth Circuit precedent.

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IV. Conclusion

Since Dewan, this Court has reviewed a number of similar disputes involving the

application of these FLSA exemptions to jobs within the oil drilling/consulting industry. The

resolution in each instance has been highly fact specific. Since both the facts and the inferences

one draws from the facts are heavily disputed, the Court declines to grant summary judgment for

either party.

Having considered the Parties’ briefing, exhibits, and responses thereto, the Court hereby

ORDERS that Defendant’s Motion for Summary Judgment (Doc. No. 48) and Plaintiffs’ Motion

for Summary Judgment (Doc. No. 58) are both hereby DENIED.

Signed at Houston, Texas, this Ce day of August, 2019.

UNITED STATES DISTRICT JUDGE

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