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Court finds company had improper communications with overtime claimants

A federal court in New Mexico recently found that an oil and gas company engaged in “confusing and misleading” communications with its workers about a proposed release of overtime claims.  Defendant Mewbourne Oil Company is an oil and gas production company with operations in New Mexico, Oklahoma, and Texas. In August 2016, the United States Department of Labor (“DOL”) commenced an investigation into Defendant’s practices of classifying its employees, and as a result, the Defendant made back-wage payments to 53 of its Lease Operators and obtained DOL-approved releases from them. Further, in October 2016, Defendant reclassified its Lease Operators as hourly, non-exempt employees entitled to overtime. It was not until June 21, 2017, however, that Defendant began paying its Lease Operators overtime for hours worked in excess of 40 hours a week.

Plaintiff, who did not receive any funds as a result of the DOL investigation and did not sign any release of claims, commenced this action “individually and on behalf of all others similarly situated” against Defendant, asserting violations of both the FLSA and the New Mexico Minimum Wage Act (“NMMWA”). Thereafter, Plaintiff filed a motion seeking conditional certification of an FLSA collective action, which he later amended. On May 18, 2020, the Court entered a Memorandum Opinion and Order (“May 2020 Opinion”) granting Plaintiff’s amended motion for conditional certification of an FLSA collective action, conditionally certifying a class of “all persons who worked as a Lease Operator or Pumper for Defendant at any time between October 31, 2015 and June 21, 2017.” On April 25, 2019, Plaintiff’s counsel advised defense counsel that Plaintiff would be moving for Rule 23 certification of a class action. Soon thereafter, on May 6, 2019, Mewbourne held an “informational meeting” for its employees regarding their benefits. 

In advance of the meeting, Mewbourne drafted a “Confidential Settlement Communication” (the “Settlement Letter”) addressed to 56 of its employees, offering to pay each of them “$1,000 per year of employment as a lease operator with Mewbourne, through June 30, 2017, in exchange for a full release of any claims for unpaid wages and overtime pay that [such employee] may have under any state or local law.” “In the days leading up to the meeting,” Scott Lacy, Mewbourne’s Production Superintendent, “contact[ed] by telephone” these “56 employees . . . to inquire if they planned to attend the meeting and to notify them that there would be an envelope available for them after the meeting,” and had “brief” conversations with “these employees.”

At the May 6, 2019 meeting, a Mewbourne supervisor announced that employees who had been contacted about having an envelope waiting for them could pick the envelope up from the office’s reception desk after the meeting. After the meeting ended, most of the 56 employees to whom Mewbourne extended settlement offers picked up their envelopes from the receptionist at the front office. Mewbourne mailed the envelopes to the employees who did not pick them up in person.

The Settlement Letter advises that Jonathan Felps, a former lease operator, commenced this action against Mewbourne and Drew Greene, but does not include the name or caption of the instant case, or the name or contact information of Plaintiff’s counsel. The Settlement Letter indicates that Mewbourne and Greene “strongly disagree” with Felps’s allegations and are “vigorously defending” against Felps’s claims.  The Settlement Letter advises the recipient that, if the Court were to grant Plaintiff’s request and certify a class action, “[he or she] would be part of Jonathan Felps’ lawsuit if [he or she] did nothing.” 

The Settlement Letter explains that Defendants’ decision to extend “offer[s] of compromise to compensate” Mewbourne’s lease operators was made “[i]n an effort to minimize ongoing costly and time-consuming litigation,” and refers to the recipient as part of “the Mewbourne team.” The Settlement Letter notes that the recipient’s “relationship with Mewbourne will be completely unaffected by [the recipient’s] acceptance or rejection of this settlement offer,” that whether the recipient accepts the offer “is completely up to” the recipient,” and that this is a voluntary process.”  The Settlement Letter also includes the following language: “Mewbourne hopes you will accept this offer;” and “I [Lacy] hope you will thoughtfully consider this letter.”  The Settlement Letter advises the recipient to “read the Release carefully before signing it,” but does not recommend that the recipient consult an attorney.  The Settlement Letter requests that if the recipient decides to accept the offer, he or she return the Release within 10 days of receipt of the letter. 

The Settlement Letter encloses a Settlement Agreement and Release (the “Release”). The first sentence of the first paragraph of the Release states that the recipient, in exchange for a lump sum payment from Mewbourne, releases “any and all rights that [he or she] may have to file a claim, bring suit, or seek recovery for back wages and overtime pay under any state or local law, including but not limited to the [NNMWA]” against Mewbourne and its employees.  The fourth sentence of that same paragraph states: “I understand that my signing of this Release will extinguish all unpaid wage and overtime claims, including interest, penalties, and liquidated damages, I may have through today’s date.”  (emphasis added). Of the 56 employees who were presented with a Settlement Letter, 55 individuals signed a Release. 

The plaintiff subsequently filed a Rule 23 motion for class certification as well as a Motion for Corrective Notice, asking the Court to enter an order: (1) invalidating the 55 Releases signed by Mewbourne Lease Operators; (2) restricting Defendants from communicating with putative class members about this case; (3) requiring Defendants to send out “corrective notice” to the putative class; and (4) setting a briefing schedule for a motion for Plaintiff to obtain attorney fees and costs in connection with the instant motion.

The Court found that “certain aspects of Defendants’ written and oral communications regarding their offers of settlement, considered against the backdrop of the continuing employment relationship between Defendants and the recipients of those offers, were confusing and misleading and had a potentially chilling effect on participation in this lawsuit such that narrowly tailored remedial measures are warranted.” The Court then determined that it was “appropriate…to fashion remedial measures to dispel any confusion or misunderstandings and to ensure participation in the lawsuit by those who otherwise would want to participate, while at the same time carefully guarding Defendants’ First Amendment rights.” The Court, as part of its order, “restrict[ed] Defendants from communicating with putative class members about this action or the claims or defenses raised herein, for purposes of settlement or otherwise, without first submitting such communications to the Court for review.”  The Court also allowed Plaintiff to “revise the Notice and Consent that the Court ordered to be issued in its May 2020 Opinion to clarify that Plaintiff is pursuing claims under both the NMMWA and the FLSA, that any settlement proposed by Defendants thus far applies only to Plaintiff’s NMMWA claims and not to his FLSA claims, that regardless of whether a putative class member signed a Release, he or she is eligible to opt into this FLSA collective action, and that by failing to affirmatively opt into the action (by measures that should be outlined in the Notice), he or she will lose that eligibility and may lose the right to recover at all on his or her FLSA claims as a result of the applicable statute of limitations.” The Court also provided that “the Notice should also clearly advise the putative class members as to the relief Plaintiff requests in connection with his FLSA claims.” Lastly, “the Notice should explain in detail that, regardless of any continuing employment relationship between Defendants and their employees and any interest that Defendants may have in settling rather than litigating Plaintiff’s claims, any retaliation by Defendants against its employees for taking part in this lawsuit is absolutely prohibited by law.”  The Court declined the Plaintiff’s request to invalidate the releases at this time, finding it more appropriate to entertain invalidating individual releases at a later date.  The Court also declined to award the Plaintiff attorney’s fees, finding that the Defendant’s conduct, while improper, did not violate any court orders.    

Defendants sometimes panic when faced with an overtime class action and attempt to take matters into their own hands to discourage employees from asserting their claims.  This case is yet another example as to why it is a bad idea to do so. 

About the author: Josh Borsellino is an attorney licensed in Texas that represents oilfield workers on claims for unpaid overtime.  For a free consultation of your overtime issue, call Josh at 817.908.9861 or complete this form.   

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