Oil and Gas Staffing Company Permitted To Intervene In FLSA Collective Action Wage Dispute And Move To Compel Arbitration

By Gerald L. Maatman, Jr., Natalie Bare, and Emilee N. Crowther

Duane Morris Takeaways: In Bone v. XTO Energy, Inc., No. 21-CV-1460, 2023 WL 5431139 (D. Del. Aug. 23, 2023), the Judge Joel H. Slomsky of the U.S. District Court for the District of Delaware granted RUSCO Operating, LLC and Ally Consulting, LLC’s (collectively, “RUSCO”) Motion to Intervene in a case filed by workers that used its app to connect with a company seeking their safety consulting services. The Court allowed RUSCO to intervene as a matter of right based on RUSCO’s interest in its classification of workers that use its app as independent contractors and its interest in enforcing RUSCO’s arbitration agreement.  This case serves as a reminder to companies that provide staffing services of the benefits of monitoring litigation filed against partner companies (and the potential pitfalls of not doing so).

Case Background

Plaintiffs Cory Bone and Luis Carillo were safety consultants engaged by Defendant XTO Energy, Inc. (XTO) as independent contractors through an online app operated by RUSCO Operating, LLC and Ally Consulting.  Id. at 1.  They sued on behalf of themselves and other similarly- situated workers engaged through the app, alleging misclassification and subsequent failure to pay overtime in violation of the Fair Labor Standards Act (“FLSA”).  Id.  RUSCO asserted that they paid Plaintiffs directly for the work they provided to XTO, and by using the app, Plaintiffs and putative collective action members had agreed to arbitrate any employment-related disputes.  Id. at 2.  RUSCO filed a Motion to Intervene to enforce the arbitration agreement.  Id.

The Court’s Decision

The Court concluded that RUSCO could intervene as a matter of right.  Id.

Under Rule 24, a non-party may intervene (1) as a matter of right, if the disposition of the case would impair its interest; or (2) as a matter of permission, if common questions of law and fact exist between the non-party’s claims or defenses and those at issue in the case.  The Court explained that a party must timely demonstrate the following to intervene as a matter of right: “(1) a sufficient interest in the litigation; (2) a threat that the interest will be impaired or affected, as a practical matter, by the disposition of the action; and (3) that its interest is not adequately represented by the existing parties and the litigation.”  Id. (quoting Commonwealth v. President of the United States of America, 888 F.3d 52, 57 (3d Cir. 2018).

The first prong required RUSCO to demonstrate a “significantly protectable” interest, i.e., one that is specific to the intervener, capable of definition, “and will be directly affected in a substantially concrete fashion by the relief sought.”  Id. at 4 (quoting Kleissler v. U.S. Forest Serv., 157 F.3d 964, 972 (3d Cir. 1998)).

The Court held that RUSCO met this prong because it classified any workers using its app as independent contractors and Plaintiffs’ claims against XTO turned “on whether Plaintiffs [were] employees or independent contractors.”  Id.  In addition, the Court opined that RUSCO had a significant protectable interest in the litigation due to its interest in enforcing the arbitration agreement Plaintiffs had executed in order to use the app.  Id. (discussing RUSCO’s successful intervention in Field v. Anadarko Petro. Corp., 35 F.4th 1013, 1016 (5th Cir. 2022) based on its “interest in enforcing [its] arbitration agreements, particularly given the interrelatedness of the parties’ contractual relationships and the plaintiff’s claims, is ‘a stake in the matter that goes beyond a generalized preference that the case come out a certain way’”).

The second prong required RUSCO to establish “a tangible threat to [its] legal interest.” Id. at 5.  The Court held that RUSCO met this prong because the Court’s determinations regarding independent contractor misclassification and arbitration agreement enforcement “could negatively impact RUSCO’s legal interests.”  Id.

Finally, the third prong required RUSCO to establish that its interest “diverge[d] sufficiently from the interests of [XTO], such that [XTO might not be able to] devote proper attention to the [RUSCO’s] interests.”  Id.  (citing Commonwealth, 888 F.3d at 59).  on this issue, the Court concluded that XTO could not adequately represent RUSCO’s interest in the litigation because Plaintiffs brought claims based on improper payment, and RUSCO — not XTO — had paid the workers asserting those claims.  Id.  Moreover, at the time of RUSCO’s intervention, XTO had not yet sought to compel Plaintiffs to arbitration so it had not devoted proper attention to RUSCO’s interests in that regard.  Id.

Implications for Employers

Companies providing staffing services should review litigation filed against the entities to which they provide staff to evaluate whether the disposition of claims or issues in the litigation will implicate their interest. Staffing companies that refer workers to other companies should ensure the contract contains adequate notice provisions concerning litigation pertaining to the employment relationship. Companies that do not discover litigation that may affect their interests may have to live with results of unfavorable outcomes.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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