Introduction: The case of Richardson v. NES Global, LLC from the Southern District of Texas, Houston Division, highlights some of the many ways in which companies in the oil and gas industry can violate their workers’ rights under the FLSA.

Case Background: Jay Richardson filed a collective action lawsuit against his employer, NES Global, LLC, claiming that NES failed to pay overtime wages for hours worked beyond 40 per week. Representing himself and similarly situated workers, Richardson sought compensation for unpaid overtime under the FLSA. The legal debate centered around NES’s classification of certain employees as exempt from overtime pay, particularly focusing on the salary-basis test.

The Workers: The workers involved in this case were primarily contract employees, referred to as “Candidates,” who were assigned to various projects for NES’s clients, primarily in the oil and gas industry. These workers were responsible for a range of technical and operational tasks, including overseeing field operations, managing project logistics, and ensuring compliance with industry standards. Despite the demanding nature of their roles, these employees were paid under a compensation structure that often failed to provide adequate overtime pay, prompting the legal challenge. NES paid its Candidates “a straight hourly or day rate for all hours worked each workweek.” In 2016, the DOL audited NES’s hourly rate pay structure and pay practices and determined that NES “misclassified hourly non-exempt employees as exempt employees” and therefore owed 205 employees over $2 million in overtime compensation.

Key Issues and Rulings:

1. Class Certification and Case Stay: Initially, the court conditionally certified two classes of employees: those deemed exempt and those nonexempt from overtime pay under the FLSA. The case was paused while awaiting the Supreme Court’s decision in Hewitt v. Helix Energy, which significantly impacted the interpretation of the salary-basis test.
2. Salary-Basis Test Failure: NES’s compensation model involved a “Retainer” system, guaranteeing a minimum salary based on a set number of hours. The court found this system failed the FLSA’s salary-basis test as the compensation fluctuated with hours worked, undermining the notion of a fixed salary.
3. The Reasonable Relationship Test: The court applied the reasonable relationship test to evaluate whether NES’s guaranteed weekly pay had a reasonable correlation with the total compensation actually earned. The plaintiffs’ evidence showed that their earnings were often far beyond the guaranteed Retainer, with ratios significantly exceeding the 1.5-to-1 benchmark, indicating a failure to meet the test’s requirements.
4. Summary Judgment and Decertification Attempts: Despite NES’s argument for decertifying the class, the court held firm, affirming that the issues could be resolved collectively. Partial summary judgment was granted in favor of Richardson, establishing NES’s liability for unpaid overtime due to misclassification of employees.
5. Willfulness and Good Faith Defense: The court ruled that NES’s actions were not willful, thereby applying a two-year statute of limitations. Moreover, NES successfully argued that it acted in good faith, having relied on legal counsel and attempted compliance with FLSA guidelines, which shielded them from liquidated damages.

Conclusion: The Richardson v. NES Global case provides crucial insights into the stringent requirements of the FLSA regarding overtime pay and the nuanced interpretation of salary-basis and reasonable relationship tests. It serves as a significant reminder for employers to meticulously review their pay structures to ensure compliance with federal labor laws, as deviations can lead to costly legal battles and financial liabilities.

If you have been paid on a “retainer” system, straight time, a day rate or under any other system that denies you overtime, you may be owed back wages. Call us at 817.908.9861, email me here or use this contact form for a free consultation.