Berry v. Drive Casa, LLC
| Decision Date | 21 April 2022 |
| Docket Number | Civil Action 3:21-CV-0433-D |
| Parties | CRITTENDEN BERRY, Plaintiff, v. DRIVE CASA, LLC, et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Plaintiff Crittenden Berry (“Berry”) sues defendants Drive Casa, LLC (“Drive Casa”), Mark Gallas (“Gallas”), and Justin Cox (“Cox”) seeking to recover unpaid overtime pay pursuant to the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C § 201 et seq.[1]Defendants rely on the administrative exemption affirmative defense to avoid liability. Following a bench trial, and for the reasons that follow, the court finds that defendants proved that Berry was an exempt employee and therefore not entitled to recover overtime compensation under the FLSA.[2]
Defendant Drive Casa owns and operates subprime auto finance dealerships in the Dallas/Fort Worth area and Waco, Texas. Drive Casa was founded by Streeter Berry Berry's brother. Defendant Gallas is Drive Casa's Chief Executive Officer, and defendant Cox is a part owner of the company. In 2019 Drive Casa hired Berry to work in its Finance Department under its Chief Financial Officer, Ryan Simbeck (“Simbeck”). In this position, Berry was paid an hourly wage and received overtime pay for hours he worked in excess of 40 per week.
On October 1, 2019 defendant Gallas promoted Berry to the position of Information Technology (“IT”) Director, a new position at Drive Casa, a relatively new and growing company whose IT functions had previously been largely outsourced. As IT Director, Berry was paid an annual salary of $75, 000 and was not paid overtime for work hours that exceeded 40 per week.[3] Berry maintains in this suit that he should have been paid overtime from the time he was made IT Director until the date his employment was terminated on January 5, 2021. Defendants raise as an affirmative defense that Berry was an exempt employee under the administrative exemption and therefore not entitled to overtime pay.[4]
The FLSA requires employers to pay overtime compensation to employees who work more than 40 hours a week. 29 U.S.C. § 207(a)(1). “Exempt from the FLSA, however, are individuals ‘employed in a bona fide executive, administrative, or professional capacity.'” Fraser v. Patrick O'Connor & Assocs., 954 F.3d 742, 745 (5th Cir. 2020) (quoting 29 U.S.C. § 213(a)(1)). “[T]he ultimate decision whether [an] employee is exempt from the FLSA's overtime compensation provisions is a question of law.” Lott v. Howard Wilson Chrysler-Plymouth, Inc., 203 F.3d 326, 331 (5th Cir. 2000) (alterations in original). “With respect to the underlying facts, the employer has the burden of establishing that an exemption applies by a preponderance of the evidence.” Fraser, 954 F.3d at 745 (citing Meza v. Intelligent Mex. Mktg., Inc., 720 F.3d 577, 581 (5th Cir. 2013)). In deciding whether an exemption applies, the court “must give FLSA exemptions a ‘fair reading' rather than narrowly construing them against the employer.” Faludi v. U.S. Shale Sols., L.L.C., 950 F.3d 269, 273 (5th Cir. 2020) (quoting Encino Motorcars, LLC v. Navarro, __U.S.__, 138 S.Ct. 1134, 1142 (2018)).
To establish that the FLSA administrative exemption applies, defendants must prove three requirements by a preponderance of the evidence: (1) the employee must be “[c]ompensated on a salary or fee basis . . . at a rate of not less than $684 per week, ” (2) the employee's “primary duty” must be “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 (3) the employee's “primary duty” must “include[] the exercise of discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200(a); see also Dewan v. M-I, L.L.C., 858 F.3d 331, 334 (5th Cir. 2017)). A preponderance of the evidence means such evidence as, when considered and compared with that opposed to it, has more convincing force and produces in the mind of the trier of fact a belief that what is sought to be proved is more likely true than not true. To establish an affirmative defense by a “preponderance of the evidence” means to prove that the defense is more likely so than not so. Defendants have the burden of proving each of the three required elements of their affirmative defense by a preponderance of the evidence.
It is undisputed that Drive Casa paid Berry more than $684.00 per week. Accordingly, the focus of the court's decision is on whether defendants have proved that Berry's “primary duty” was the performance of office or non-manual work directly related to the management or general business operations of Drive Casa or Drive Casa customers, and whether defendants have proved that Berry's “primary duty” included the exercise of discretion and independent judgment with respect to matters of significance.
The second element of the administrative exemption affirmative defense requires the employer to establish that the employee's “primary duty is 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.” 29 C.F.R. § 541.200(a)(2). 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 a retail or service establishment.'” Dewan, 858 F.3d at 335 (quoting 29 C.F.R. § 541.201(a)). For the “directly related” inquiry, “it is ‘the type of work performed by the employee' on which [the court] must focus.” Id. (quoting 29 C.F.R. § 541.201(a)). Lott, 203 F.3d at 331 (citing Smith v. City of Jackson, 954 F.2d 296, 299 (5th Cir.1992)).
The third element requires that the employer establish that the employee's “primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200(a)(3).
In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term “matters of significance” refers to the level of importance or consequence of the work performed.
29 C.F.R. § 541.202(a); see also Hobbs v. EVO Inc., 7 F.4th 241, 250 (5th Cir. 2021). The exercise of discretion must involve more “than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources.” Jones v. New Orleans Reg'l Physician Hosp. Org., 981 F.3d 428, 435 (5th Cir. 2020) (quoting 29 C.F.R. § 541.202(e)). But an employee “need not exercise final decision-making authority to fulfill the regulation's standard.” Id. (citing Lott, 203 F.3d at 331); see also 29 C.F.R. § 541.202(c) ().
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.
The court finds that defendants established each of the three requirements of the FLSA administrative exemption by a preponderance of the evidence: that is, they proved that (1) Berry was compensated on a salary basis at a rate of not less than $684.00 per week; that (2) Berry's primary duty was the performance of office or non-manual work directly related to the management or general business operations of Drive Casa or its customers; and (3) that Berry's primary duty included the exercise of discretion and independent judgment with respect to matters of significance. The evidence that supports the court's findings includes the following:[5]
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