Opinion
1:23-CV-790-DII
04-11-2024
KEVIN LEE GARCIA, individually and on behalf of all other similarly situated, Plaintiff, v. PEGASO ENERGY SERVICES, LLC, Defendant.
HONORABLE ROBERT PITMAN, UNITED STATES DISTRICT JUDGE:
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
MARK LANE, UNITED STATES MAGISTRATE JUDGE
Before the court is Defendant Pegaso Energy Services, LLC's (Pegaso) Motion to Dismiss Plaintiff's First Amended Collective Action Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Dkt. 7) and all related briefing. Having reviewed the pleadings, the relevant case law, as well as the entire case file, and determined that oral arguments are not necessary, the undersigned issues the following Report and Recommendation.
United States District Judge Robert Pitman referred to the Motion to the undersigned for a Report and Recommendation as to the merits pursuant to 28 U.S.C. § 636(b)(1)(B), Rule 72 of the Federal Rules of Civil Procedure, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. Text order, Nov. 17, 2023.
I. Background
Plaintiff Kevin Lee Garcia worked for Pegaso as a tool pusher; Pegaso “offers a complete suite of [oil] well site solutions that focus on maximizing well performance, efficiency, and productivity.” Dkt. 8 at 2. Garcia worked for Pegaso from July 2022 until May 2023. Dkt. 6 (First Amended Collective Action Complaint hereinafter FAC) ¶2. Pegaso classified Garcia as a W2 employee, paying him $4,423.08 on a bi-weekly basis or $115,000 per year. Id. ¶¶23, 27. Garcia also received from Pegaso a $225 “day rate bonus” and a $150 “per diem.” Id. ¶30.
Garcia brings one cause of action on behalf of himself and others similarly situated under the FLSA, alleging that Pegaso failed to pay him (and similarly situated employees) overtime compensation for hours worked beyond 40 hours per week. Id. ¶¶32, 78, 80, 82.
Pegaso seeks to dismiss the lawsuit, contending that Garcia's compensation structure complies with the FLSA. Dkt. 7 at 5. In response, Garcia maintains that Pegaso misclassified Garcia (and other employees) and argues the cases on which Pegaso relies are nonbinding or distinguishable. Dkt. 8 at 1, 4-6.
II. Legal Standard-Motion to Dismiss Under Rule 12(b)(6)
When evaluating a motion to dismiss for failure to state a claim under Rule 12(b)(6) the complaint must be liberally construed in favor of the plaintiff and all facts pleaded must be taken as true. Leatherman v. Tarrant Cnty. Narcotics Intel. & Coordination Unit, 507 U.S. 163, 164 (1993); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). Although Federal Rule of Civil Procedure 8 mandates only that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief,” this standard demands more than unadorned accusations, “labels and conclusions,” “a formulaic recitation of the elements of a cause of action,” or “naked assertion[s]” devoid of “further factual enhancement.” Bell Atl. v. Twombly, 550 U.S. 544, 555-57 (2007). Rather, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id. at 570.
The Supreme Court has made clear this plausibility standard is not simply a “probability requirement,” but imposes a standard higher than “a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The standard is properly guided by “[t]wo working principles.” Id. First, although “a court must ‘accept as true all of the allegations contained in a complaint,' that tenet is inapplicable to legal conclusions” and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678. Second, “[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. Thus, in considering a motion to dismiss, the court must first identify pleadings that are no more than legal conclusions not entitled to the assumption of truth, then assume the veracity of well-pleaded factual allegations and determine whether those allegations plausibly give rise to an entitlement to relief. If not, “the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. at 679 (quoting FED. R. CIV. P. 8(a)(2)).
III. Preliminary note
To begin, the undersigned is compelled to note the parties' sloppiness in their briefing. The issue presented does not arrive on well-trodden ground, and the court would have benefited from elevated analysis. Unfortunately, typos, poor citations, and mischaracterizations detracted from the undersigned's efforts to resolve this motion efficiently.
Garcia's briefing contains clear misstatements. For example, a heading in his Response states: “The Fifth Circuit Analysis in Gentry is Binding and More Appropriate.” Dkt. 8 at 6. To the contrary, the case is unpublished and carries a warning that its precedential value is severely limited. Gentry v. Hamilton-Ryker IT Sols., No. 22-40219, 2023 U.S. App. LEXIS 18817, at *1 (5th Cir. 2023) (unpublished). Poor citations, such as to “Gentry at *1-2,” Dkt. 8 at 6, frustrated the court as Garcia references both the Fifth Circuit's unpublished opinion and the magistrate court's opinion. Compare Id. with id. at 4.
Pegaso's briefing is just as problematic as Garcia's-if not more so. The Motion and Reply contain distracting typos, e.g., Dkt. 7 at 15 & 20, citations to nonexistent footnotes, id. at 10, and legal propositions unaccompanied by authority. Id. at 2.
More disturbingly, Pegaso's briefing misrepresents binding authority and Garcia's briefing. Pegaso suggests that a Fifth Circuit opinion “is notable given [Garcia's] unsupported assertions (i.e., that Hebert was primarily an office-based employee who only received bonuses for occasional work in the field . . .) . . . In other words, the majority of Hebert's days were spent working in the field ....” Dkt. 9 at 4 n.4 (emphasis added). The undersigned struggled to reconcile Pegaso's statements with the Fifth Circuit's: “Hebert spent over half of his time in the office ....” Hebert v. FMC Techs., No. 22-20562, 2023 U.S. App. LEXIS 15578, at *2 (5th Cir. 2023) (unpublished) (emphasis added). The undersigned did not struggle to conclude that Garcia accurately represented the facts in Herbert and that the plaintiff in that case “did significant office work.” Dkt. 8 at 5.
The undersigned recommends that the District Court approach the parties' assertions and representations of law with caution.
IV. Analysis
The FLSA generally requires employers to pay covered employees overtime wages “for a workweek longer than forty hours.” See 29 U.S.C. § 207(a)(1). “To state a prima facie overtime pay claim” under “§ 207(a)(1), a plaintiff must plausibly allege: (1) existence of “an employer-employee relationship” during the periods worked in excess of forty hours per week; (2) the plaintiff “engaged in activities covered by the FLSA”; (3) a violation of “the FLSA's overtime wage requirements”; and (4) “the amount of overtime compensation due.” White v. U.S. Corr., 996 F.3d 302, 309 (5th Cir. 2021). A plaintiff may satisfy the second element by alleging that he “engaged in commerce or in the production of goods for commerce, or was employed in an enterprise engaged in commerce or in the production of goods for commerce.” Robinson v. RWLS, No. SA-16-CA-00201-OLG, 2016 WL 9308422, at *2 (W.D. Tex. Aug. 11, 2016) (recommendation of Mag. J.) adopted by 2016 WL 9308525 (W.D. Tex. Sept. 16, 2016). The fourth element may be stated as the plaintiff “received compensation less than one and one-half times the regular rate at which he or she is employed,” and can be satisfied “by pleading sufficient facts to put the defendant on notice as to the approximate date ranges, as well as the approximate number of hours worked, for which the plaintiff claims he was under-compensated.” Id. (cleaned up).
The only element in dispute here is the third element-whether Pegaso violated the FLSA's overtime wage requirement. Dkts. 7 at 5; 8 at 3.
A. Individual overtime claim
Garcia has made sufficient factual allegations in his FAC to state an individual claim under § 207(a)(1). He has made factual allegations about each element of a prima facie claim. See FAC ¶¶ 2, 38, 39, 3-12, 25-35, 38-45. In White, the Fifth Circuit held that similar allegations were sufficient to state such a claim. See 996 F.3d at 309.
That said, there are many exemptions from the overtime requirements. See 29 U.S.C. § 213; Encino Motorcars v. Navarro, 584 U.S. 79, 89 (2018) (recognizing that “the FLSA has over two dozen exemptions in § 213(b) alone”). Relevant here, § 213(a)(1) exempts individuals “employed in a bona fide executive, administrative, or professional capacity.” Through that statute, “Congress has authorized the Secretary [of the Department of Labor] to promulgate regulations exempting” these individuals from overtime. Hewitt v. Helix Energy Sols. Grp., 15 F.4th 289, 290 (5th Cir. 2021) (en banc), cert. docketed, Case No. 21-984 (U.S. Jan. 11, 2022) (hereinafter Helix I). “Under that authority, the Secretary has exempted ‘highly compensated' as well as more modestly paid ‘executive,' ‘administrative,' and ‘professional' employees.” Id. (respectively citing 29 C.F.R. §§ 541.601, 541.100, 541.200, 541.300).
To be exempt under “any of these exemptions,” the employee must satisfy three conditions: (1) “the employee must meet certain criteria concerning the performance of executive, administrative, and professional duties”; (2) “the employee must meet certain minimum income thresholds”; and (3) “the employee must be paid on a ‘salary basis.'” Id. While “the duties criteria and income thresholds vary from exemption to exemption, the regulations apply the same salary-basis requirement to all four exemptions.” Id. at 290-91.
Pegaso asserts that Garcia is exempt as a highly compensated employee under 29 C.F.R. § 541.601. See Dkt. 7 at 5-6. Section 541.601(a)(1) provides:
Beginning on January 1, 2020, an employee with total annual compensation of at least $107,432 is deemed exempt under [§ 213(a)(1)] if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee as identified in subparts B, C or D of this part.
The regulations provide:
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. Thus, a highly compensated employee will qualify for exemption if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee identified in subparts B, C or D of this part. An employee may qualify as a highly compensated executive employee, for example, if the employee customarily and regularly directs the work of two or more other employees, even though the employee does not meet all of the other requirements for the executive exemption under § 541.100.29 C.F.R. § 541.601(c). This exemption, furthermore, “applies only to employees whose primary duty includes performing office or non-manual work.” Id. § 541.601(d). And, as stated previously, to be exempt as a highly compensated employee, the employee “must be paid on a ‘salary basis.'” Helix I, 15 F.4th at 293; accord 29 C.F.R. § 541.601(b)(1) (explaining that “‘[t]otal annual compensation' must include at least $684 per week paid on a salary or fee basis”). Furthermore, “[u]nder § 541.604(b), an employee whose pay is computed on a daily basis must meet certain conditions in order to satisfy the salary-basis test.” Helix I, 15 F.4th at 293 (internal quotation marks omitted).
1. Pegaso has the burden to establish an affirmative defense
“If the employer claims ‘that the suing employee is exempt from the overtime requirement,' then the employer ‘has the burden of proving that the employee falls within the claimed exempted category.'” Johnson v. Heckmann Water Res. (CVR), 758 F.3d 627, 630 (5th Cir. 2014) (quoting Samson v. Apollo Res., 242 F.3d 629, 636 (5th Cir. 2001)); accord Carley v. Crest Pumping Tech., 890 F.3d 575, 579 (5th Cir. 2018). “[C]ourts are to give FLSA exemptions ‘a fair reading,' as opposed to the narrow interpretation previously espoused by [the Fifth Circuit] and other circuits.” Carley, 890 F.3d at 579 (quoting Encino, 584 U.S. at 89).
The highly compensated employee exemption is an affirmative defense to liability. Corning Glass Works v. Brennan, 417 U.S. 188, 196 (1974). An asserted defense may support a Rule 12(b)(6) dismissal, but it does so only when the defense is conclusively established from the face of the operative pleading. Morrison v. Marathon Petroleum Co., LP, No. SA-20-CV-0480-JKP-RBF, 2021 U.S. Dist. LEXIS 83852, at *7 (W.D. Tex. 2021); accord Larter & Sons v. Dinkler Hotels Co., 199 F.2d 854, 855 (5th Cir. 1952). At the pleading stage, it may be “premature” to rule that an FLSA exemption forecloses a plausibly stated § 207(a)(1) claim. White, 996 F.3d at 310. This is so, because “the ‘determination as to whether an employee is exempt under the [FLSA] is primarily a question of fact' typically better suited for summary judgment.” Id. (quoting Dalheim v. KDFW-TV, 918 F.2d 1220, 1224 (5th Cir. 1990)).
“This is just such a typical case.” See id. While the exemption in White differs from this case, the asserted exemption is not the key to the undersigned's determination. “Rather, the key is whether the operative pleading conclusively establishes the defense.” Guilbeau v. Schlumberger Tech. Corp., No. SA-21-CV-0142-JKP-ESC, 2022 U.S. Dist. LEXIS 11092, at *14 (W.D. Tex. Jan. 21, 2022) (Pulliam, J.).
Pegaso, asserting the defense, argues that Garcia is exempt from overtime pay because he is a highly compensated employee. Dkt. 7 at 5-15. Although Garcia lists income in the FAC that satisfies a requirement of the exemption, the FAC does not conclusively show that the exemption applies. While “earning a certain level of income is necessary,” on its own, it is insufficient “to avoid the overtime protections of the FLSA.” Helix I, 15 F.4th at 291. Pegaso suggests that Garcia does not clearly allege his day-to-day job duties. Dkt. 7 at 15 (“Garcia's Amended Complaint attempts to equivocate on his job responsibilities.”). But the operative complaint, the FAC, alleges Garcia did “very little management of personnel.” Dkt. 6 ¶49. And it alleges that “[a]s a Tool Pusher, [Garcia's] primary job duties included drilling work and well maintenance activities . . .[Garcia] was also responsible for logistical matters such as ensuring the rig had the necessary tools, equipment, and supplies.” Id. Viewing the allegations that Garcia worked as a tool pusher in the light most favorable to him, the undersigned cannot say that the FAC conclusively shows satisfaction of all requirements for the highly compensated employee exemption.
Pegaso also notes that the Original Complaint (Dkt. 1) stated Garcia's “primary job duties . . . [included] the management of contractors and personnel,” and suggests a change of heart regarding his duties. Dkt. 9 at 5 n.7 (comparing Original Complaint with FAC). The undersigned concludes this is neither here nor there because the FAC is the live pleading. “An amended complaint supersedes the original complaint and renders it of no legal effect unless the amended complaint specifically refers to and adopts or incorporates by reference the earlier pleading.” King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994) (emphasis added) (citing Boelens v. Redman Homes, 759 F.2d 504, 508 (5th Cir. 1985)).
2. Hybrid compensation structure's effect on exemption
Pegaso maintains that Garcia was a highly compensated employee and that his compensation structure did not negate the exemption from overtime. Garcia was compensated via a hybrid structure: Pegaso paid him a salary but also paid him for days worked in the field and per diems. See Dkt. 7 at 6 (citing Dkt. 6 (FAC) ¶¶ 26-27, 30). Section § 541.604 addresses scenarios where employees are paid additional compensation beyond a minimum salary. Garcia and Pegaso disagree about whether Garica's pay structure is that of a salary plus bonus or a salary plus a day rate. Garcia contends that the “payments were elements of [his] compensation . . .shift[ing] the analysis from [] § 604(a) to § 604(b).” Dkt. 8 at 4. Pegaso characterizes the day rate payments as “bonus” payments, Dkt. 7 at 2, arguing that the payments necessarily fall within the ambit of § 604(a). Id. Pegaso points out that § 604(a) specifically authorizes employers to make payments to employees without losing the highly compensated employee exemption, stating “payment of additional compensation beyond [Garcia's] bi-weekly salary does not violate the salary basis requirement.” Dkt. 7 at 8 (citing 29 U.S.C. § 541.604(a)).
A label is “dispositive only to the degree that it mirrors the economic reality of the relationship.” Donovan v. Tehco, 642 F.2d 141, 143 (5th Cir. 1981).
Pegaso maintains that the “Supreme Court and Fifth Circuit are clear that § 604(b) . . . is simply not applicable where-as here-an employee receives-as part of his compensation-a set salary paid on a weekly basis or less frequent basis that is not subject to reduction because of variations in the quality or quantity of the work performed as set forth in 29 C.F.R. § 541.604(a).” Dkt. 7 at 2. Pegaso goes on that “Garcia's receipt of additional compensation in the form of day rate bonuses and per diem for days spent working in the oil field does not alter the analysis as such additional compensation is expressly authorized by § 604(a).” Id.
“[A]n exempt employee guaranteed at least $684 each week paid on a salary basis may also receive additional compensation of a one percent commission on sales. An exempt employee also may receive a percentage of the sales or profits of the employer if the employment arrangement also includes a guarantee of at least $684 each week paid on a salary basis. Similarly, the exemption is not lost if an exempt employee who is guaranteed at least $684 each week paid on a salary basis also receives additional compensation based on hours worked for work beyond the normal workweek.” 29 C.F.R. § 541.604(a) (emphasis added).
As Pegaso points out, the Supreme Court has made clear that §§ 602(a) and 604(b) are independent routes for satisfying the HCE rule's salary-basis component. Dkt. 7 at 10 (citing Helix Energy Sols. Grp. v. Hewitt, 598 U.S. 39, 56 n3 (2023) (hereinafter Helix II)). But the Supreme Court “made two important conclusions: (1) § 602(a) ‘applies solely to employees paid by the week (or longer); it is not met when an employer pays the employee by the day' and (2) ‘Dailyrate workers of whatever income level, are paid on a salary basis only through the income test set out in § 604(b).” Guilbeau, 2024 U.S. Dist. LEXIS 38008, at *21-22 (quoting Helix II, 598 U.S. at 50). Also, “the Supreme Court intimated that receiving a weekly guarantee in addition to the per-day rate would not remove the pay structure from the ambit of Section 604(b).” Guilbeau v. Schlumberger Tech. Corp., No. SA-21-CV-00142-JKP, 2023 U.S. Dist. LEXIS 117614, at *22 (W.D. Tex. Jul. 7, 2023) (Chestney, Mag. J.) adopted by 2024 U.S. Dist. LEXIS 38008, at *1 (W.D. Tex. Mar. 5, 2024) (Pulliam, J.). Indeed, footnote three “merely establishes that where a worker is paid on a purely salary basis (on a weekly or less frequent basis), Section 604(b) is not triggered.” Guilbeau, 2023 U.S. Dist. LEXIS 117614, at *22.
Pegaso's brief incorrectly states that the quoted material is contained in footnote six, but the correct footnote is three (there is not a footnote six in the case). Helix II, 598 U.S. 39 n.3, 143 S.Ct. 677, 685 (2023).
Neither Helix nor Helix II analyze § 541.604(a), and they provide no basis to consider it another exception to the salary basis dichotomy. See Helix II, 598 U.S. 39, 143 S.Ct. 677, 687 (2023) (mentioning § 541.604(a) one time); and see Helix I, 15 F.4th 289, 311 (5th Cir. 2021) (mentioning § 541.604(a) twice in the body of the opinion). “Rather, by its terms, [§ 541.604(a)] applies when an employer provides an exempt employee with additional compensation, such as a commission, a percentage of sales or profits, or for ‘hours worked for work beyond the normal workweek.'” Guilbeau, 2024 U.S. Dist. LEXIS 38008, at *26 (quoting 29 C.F.R. § 541.604(a)). “The latter type of ‘additional compensation may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off.'” Id. (quoting 29 C.F.R. § 541.604(a)). “Helix [II] defines a daily-rate worker as one who “is paid for each day he works and no others, . . . but [it] does not exclude other workers from receiving earnings computed on a daily basis. Helix [II] did not consider a worker paid on a hybrid pay structure like the Plaintiff[] in this case.” Guilbeau, 2024 U.S. Dist. LEXIS 38008, at *19-20. Just like Guilbeau, “[t]his case involves a hybrid pay structure that has an undisputed salary component along with a second component that may or may not relate to the Plaintiffs' base compensation-the parties simply disagree whether the second component is payment as part of the employees' base compensation or whether it is for duties outside the normal workweek.” Id. at *20.
Guilbeau was a highly similar case in the Western District of Texas. The Guilbeau court had the benefit of Helix I, Helix II, and Hebert and “ultimately concluded that, for [] day rate payments to fall within § 604(a), the extra compensation must be for work beyond the normal workweek.” Id. at *27-28. And “beyond the normal workweek” is “aptly defined” as “additional work not typically contemplated by the employee's regular schedule.” Id. at *28 (quoting Guilbeau, 2023 U.S. Dist. LEXIS 117614, at *22. Garcia alleges (and Pegaso does not dispute) that he received the day rate payments in the course of his regular work, i.e., not beyond his normal workweek.
Our sister court concluded “that § 604(a) excludes compensation received for the normal workweek as ‘additional compensation' . . . for at least two reasons.” Guilbeau, 2024 U.S. Dist. LEXIS 38008, at *19-20 (concluding that “if the provision was intended to apply to additional compensation provided for work performed during the normal workweek, the example's language regarding “beyond the normal workweek” would be superfluous and unnecessary” and “if the compensation is part of the employee's base compensation for work during the normal workweek, then it does not seem to be additional compensation at all-it is just base compensation, perhaps calculated differently from other base compensation”).
Because the allegations contained in the FAC allege the elements of an FLSA claim and because the allegations do not conclusively establish an affirmative defense, the undersigned will recommend that the District Court deny the motion to dismiss. Also, the court need not resolve whether § 604(a) or (b) applies at this time because Pegaso has not carried its burden to show that an asserted exemption is conclusively established on the face of the FAC.
B. Collective action claim
Although reliance on the exemption defense is premature at this stage with respect to Garcia's individual claim, it does not mean the Motion is premature entirely. It is not premature for Pegaso to challenge the collective action claims through the instant Rule 12(b)(6) Motion.
An employee may bring an action for violating the minimum wage and overtime provisions of the FLSA either individually or as a collective action on behalf of himself and “other employees similarly situated.” 29 U.S.C. § 216(b). Unlike a class action filed under Federal Rule of Civil Procedure 23(c), a collective action under § 216(b) provides a procedure for plaintiffs to “opt-in,” i.e., affirmatively notify the court of their intention to become parties to the collective action. Swales v. KLLM Transp. Servs., 985 F.3d 430, 435 (5th Cir. 2021) (citing Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 169 (1989)). In assessing a collective action in the FLSA context, the Fifth Circuit embraces “interpretive first principles: (1) the FLSA's text, specifically § 216(b), which declares (but does not define) that only those ‘similarly situated' may proceed as a collective; and (2) the Supreme Court's admonition that while a district court may ‘facilitat[e] notice to potential plaintiffs' for case-management purposes, it cannot signal approval of the merits or otherwise stir up litigation.” Id. at 434. Thus, “a district court must rigorously scrutinize the realm of "similarly situated" workers, and must do so from the outset of the case, not after a lenient, step-one ‘conditional certification.'” Id. “[T]he district court's job is ensuring that notice goes out to those who are ‘similarly situated,' in a way that scrupulously avoids endorsing the merits of the case.” Id. at 440. Accordingly, “a district court should identify, at the outset of the case, what facts and legal considerations will be material to determining whether a group of ‘employees' is ‘similarly situated.'” Id. at 441. “And then it should authorize preliminary discovery accordingly.” Id. “The amount of discovery necessary to make that determination will vary case by case, but the initial determination must be made, and as early as possible.” Id. Nonetheless and although cabined by the FLSA's “similarly situated” requirement, “[t]he bottom line is that the district court has broad, litigation-management discretion here.” Id.
Thus, “Swales sets out a ‘gatekeeping framework'-or a three-step process-for the initial phase of a potential collective action.” Gomez v. Glob. Precision Sys., 636 F.Supp.3d 746, 751 (W.D. Tex. 2022) (Guaderrama, J.) (citing Swales, 985 F.3d at 440-41). “Before proceeding with the merits phase of the case, a district court must:
(1) ‘identify . . . what facts and legal considerations will be material to determining whether a group of “employees” is “similarly situated”';
(2) ‘authorize preliminary discovery accordingly;' and
(3) then determine, based on facts from that discovery, whether plaintiffs are similarly situated and whether other employees should receive an opt-in notice.”Id. (citing Swales, 985 F.3d at 441; 29 U.S.C. § 216(b)). “Put differently, with conditional certification jettisoned, courts must now, at the outset of the case, determine whether any employees are similarly situated.” Id.
“[T]o defeat a motion dismiss under Rule 12(b)(6), a plaintiff's collective-action allegations must ‘give [d]efendants fair notice of the putative class.'” Gamboa v. Xto Energy, No. SA-21-CV-00387-OLG, 2021 U.S. Dist. LEXIS 257922, at *5 (W.D. Tex. 2021) (Garcia, J.) (quoting Huchingson v. Rao, No. 5:14-CV-1118, 2015 U.S. Dist. LEXIS 48674, at *8 (W.D. Tex. Apr. 14, 2015)). “Making sufficient factual allegations to support a collective action ‘is a low bar.'” Guilbeau, 2022 U.S. Dist. LEXIS 11092, at *16-17 (quoting Schnelle v. Chevron U.S.A., No. MO:20-CV-112-DC-RCG, 2021 WL 2773010, at *2 (W.D. Tex. Jan. 28, 2021) (recommendation of Mag. J.) adopted by 2021 WL 2773008 (W.D. Tex. Mar. 7, 2021)); see also Dkt. 9 (Pegaso's Reply) at 8 (noting low bar).
Garcia sets out a definition of the alleged class. Dkt. 6 ¶36. He also alleges that the same pay policy applied to all collective members. Id. ¶¶88, 91. He alleges that all members are similarly situated in that “they worked in the field” and Pegaso paid them a “day rate” that “was an integral and significant form of compensation.” Id.¶88; see id. ¶90. Although he does not identify job titles or responsibilities, those particularities do not affect whether the employees are similarly situated given Pegaso's generally applicable day rate pay practice. Id. ¶¶ 85-93. The undersigned finds that these factual allegations clear the low bar for the asserted collective action claim to survive dismissal at this point.
“At the pleading stage, taking the Plaintiff's allegations that other similarly situated employees were subject to the same policies as true,” the undersigned finds sufficient factual allegations “to permit the case to proceed as a collective action beyond the pleading stage.” Perez v. T.A.S.T.E. Food Prods., No. 5:13-CV-655-DAE, 2014 U.S. Dist. LEXIS 12607, at *20 (W.D. Tex. 2014); see also Guilbeau, 2022 U.S. Dist. LEXIS 11092, at *16-17 (concluding the following class definition provided fair notice: “All current and former employees of Defendant who were paid partially on a salary basis that did not bear a reasonable relationship to their total weekly earnings and partially on a day rate basis without receiving overtime premium pay for all hours worked over forty in each seven-day workweek for the time period beginning three years prior to the filing of this lawsuit through the date of the final disposition of this action.”).
Pegaso cites cases from the Northern and Southern District of Texas, decided before Swales, and urges the court to adopt a more restrictive definition of similarly situated. See Dkt. 7 at 19. But Guilbeau was a similar case, was in the Western District, and was decided after Swales (as well as Helix I, Helix II, and Hebert). And the undersigned concludes that following the lead of our sister court in San Antonio is a more desirable course. Discovery about the allegedly similarly situated employees should proceed.
Because the First Amended Complaint provides Pegaso with fair notice of the putative class, the undersigned will recommend that the District Court deny Pegaso's motion to dismiss Garcia's collective action claim.
C. Willfulness
Pegaso urges the court to dismiss Garcia's First Amended Complaint, contending Garcia did not provide sufficient factual details to support his allegation that Pegaso willfully violated the FLSA. Dkt. 7 at 20 (citing cases from the Southern District of Texas, Middle District of Florida, and District of Colorado).
“[P]laintiffs [in FLSA cases] generally are not required to prove willfulness without the benefit of discovery, and ruling on allegations of willfulness at the motion to dismiss stage are disfavored.” Hernandez-Conte v. IWC Holdings of Tex., No. SA-20-CV-01118-XR, 2021 U.S. Dist. LEXIS 9272, at *7 (W.D. Tex. 2021) (Rodriguez, J.) (citing Craven v. Excel Staffing Serv., No. CIV.A. H-12-2860, 2014 U.S. Dist. LEXIS 11668, at *8 (S.D. Tex. Jan. 30, 2014); Walker v. HongHua Am., 870 F.Supp.2d 462, 472 (S.D. Tex. 2012) (quoting and collecting cases).
Accordingly, the undersigned will decline to recommend dismissal based on Pegaso's contention that Garcia did not sufficiently allege willfulness.
V. Recommendations
For the reasons above, the undersigned RECOMMENDS the District Court DENY Defendant Pegaso Energy Services, LLC's (Pegaso) Motion to Dismiss Plaintiff's First Amended Collective Action Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Dkt. 7).
The referral to the undersigned should be canceled.
VI. Objections
The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battles v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within 14 days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Services Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc).