Oil company appeals drillers’ pay dispute

(CN) — Oilfield directional drillers who routinely pull 84-hour weeks and earn up to $200,000 a year may or may not be owed overtime by Schlumberger Technology Corp. A three-judge Fifth Circuit panel wrestled with that dispute Wednesday, questioning when a paycheck stops being a true “salary” and starts looking like disguised day-rate pay.

Schlumberger classified the plaintiffs as exempt “highly compensated employees” under the Fair Labor Standards Act, paying them a guaranteed $47,000 annual base salary — $1,826 every two weeks — plus daily “rig bonuses” that often made up 60 to 80% of their total compensation. The workers say the bonuses were really ordinary wages for their normal 12-hour, seven-day rig shifts, meaning Schlumberger owed them overtime.

At the heart of the appeal is which of two recent Fifth Circuit precedents governs. The first is Venable v. Smith International, which Schlumberger says blesses its pay plan. The second is Gentry v. Hamilton-Ryker IT Solutions, which the workers say requires a closer look at how the extra pay actually works.

The case was filed in the Western District of Texas. There, U.S. District Judge Jason K. Pulliam, a Donald Trump appointee, denied summary judgment to Schlumberger and certified two orders for interlocutory appeal. The Fifth Circuit agreed to hear the matter early. A ruling could affect not only the current collective but also similar pay plans used across the energy sector.

Attorney Robert P. Lombardi, arguing for Schlumberger, told the court the company clears every legal hurdle.

“The DDs salary is undisputed,” he said. “They concede they satisfy the duties test as well. Therefore, [Schlumberger] has satisfied all the requirements for the highly compensated employee exemption.”

Leaning heavily on precedent, Lombardi said the facts were “on all fours” with this case.

“If an employee is paid a salary plus additional compensation, the reasonable relationship test does not apply,” he said.

Senior U.S. Circuit Judge Patrick E. Higginbotham, a Ronald Reagan appointee, pressed for clarity on the numbers.

“Generally speaking, what percentage of their total pay would that [salary] represent?” he asked. Lombardi replied that the base salary accounted for only 20 to 40%, with the rest coming from the daily rig bonuses.

Plaintiffs’ attorney Melinda Arbuckle fired back that labels don’t decide the case. Quoting the Supreme Court’s Helix Energy v. Hewitt decision, she warned, “Some nurses working on a per-day or per-shift basis are likely to meet the general rules duties test, and their employers would assure them for $55 per week in a heartbeat if doing so eliminated the need to pay overtime. … That is exactly what Schlumberger has done here.”

Arbuckle argued the pay structure was functionally identical to the one struck down in Gentry, a skimpy weekly guarantee layered on top of day-rate compensation for ordinary work.

“This pay structure is functionally no different,” she said. “It’s just differently packaged.”

U.S. Circuit Judge Andrew S. Oldham, a Trump appointee, zeroed in on the guaranteed portion.

“Was the $1,826 subject to reduction?” he asked Arbuckle. She acknowledged it was not. Oldham pressed, “It was guaranteed. … And then they get extra day pay. But that’s totally fine. We never get to the reasonable relationship.”

Arbuckle countered that the analysis can’t stop at the salary label.

“You’re doing an apples and oranges comparison,” she told Oldham. “What can go up and down is 80% of my clients’ compensation. The problem is not what is guaranteed, it’s what’s protected, and that’s why [the FLSA exemption] exists at all.”

U.S. Circuit Judge Jerry E. Smith, another Reagan appointee, asked about the different roles on the rig — directional drillers, measurement-while-drilling specialists and graduate engineers — and whether salary levels reflected those differences. Arbuckle noted the plaintiffs all received the same hybrid pay plan regardless of title.

Lombardi used his rebuttal to emphasize that Schlumberger’s employees received their base salary 52 weeks a year, even during two-weeks-off rotations common in the oil patch.

“We’re dealing with true salaries, bi-weekly salaries that are a significant amount of money,” he said. “That’s the purpose of why these people are exempt from the FLSA requirements.”

The judges also probed procedural issues, including the lower court’s decision to send notice to a proposed collective of drillers and whether Schlumberger was judicially barred from making certain arguments.

Both sides agreed the outcome hinges on how the court reads the interplay between the salary-basis regulation and the “reasonable relationship” test for additional pay. Schlumberger insists Venable ends the inquiry once a qualifying salary is paid. The workers insist Helix and Gentry require courts to look past the label to the economic reality of daily pay for daily work.

The panel took the case under submission. A decision is expected in the coming months.

Follow @gabetynes