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Fifth Circuit issues independent contractor decision in oilfield overtime case

Whether an oilfield worker is an employee, and thus entitled to the protections of the Fair Labor Standards Act (“FLSA”), which is the federal statute governing overtime, or an independent contractor, is determined using many factors. Specifically, the Court of Appeals in the Fifth Circuit has recently stated that it uses the following factors: the “degree of control, opportunities for profit or loss, investment in facilities, permanency of relationship, and skill required in the claimed independent operation. United States v. Silk, 331 U.S. 704, 716 (1947); Parrish, et al v. Premier Directional Drilling, LP, Civil Action No. 17-51089 (Ct.App. 5th Cir. 2019). 

In Parrish, Civil Action No. 17-51089, the Plaintiffs, who were directional drillers, filed an FLSA collective action against the Defendant, Premier, claiming it “misclassified them as independent contractors” and failed to properly compensate them for overtime, as required by 29 U.S.C. §§ 206, 207, 215(a)(2). The District Court found Plaintiffs to be employees but the Fifth Circuit found the Plaintiffs were independent contractors and thus not entitled to overtime pay. Id. The five factors are each discussed below detailing why the Court of Appeals concluded that the Plaintiffs were independent contractors. 

  1. First, for the degree of control, the district court looked at whether the worker had a “viable economic status that can be traded to other companies.” Usery v. Pilgrim Equip. Co., Inc., 527 F.2d 1308, 1311, 1312 (5th Cir. 1976). Defendant relied upon Plaintiffs’ being “free to accept or reject any project” and “controlling the manner and method of their work.” Parrish, Civil Action No. No. 17-51089. Plaintiffs contended that they were instructed “where their assigned job was and when they needed to report for duty,” what the well plan was, what equipment would be at the drill, who could operate the drill, and when a pay raise was in order.” Id. This is not the type of control that counseled in favor of employee status so the Court of Appeals concluded that this factor weighed in favor of independent contractor status. 
  2. The second factor evaluated was “the extent of the relative investments of the worker.” Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008)(citing  Herman v. Express Sixty– Minutes Delivery Serv., Inc., 161 F.3d 299, 303 (5th Cir. 1998)). The district court and the Court of Appeals concluded “this factor favors employee status, but gave little weight in determining the status of the worker, in the light of the nature of the industry and the work involved.” Parrish v. Premier Directional Drilling, L.P., 280 F. Supp. 3d 954, 965 (W.D. Tex. 2017). “The amount each  worker contributed to the specific job [was] compared.” Parrish, Civil Action No. 17-51089. Premier invested more money at the drill sites compared to each Plaintiff and Premier’s attendant costs were critical to Plaintiffs’ being able to complete the job, but this factor gave little weight in the light of the other factors supporting independent contractor status.
  3. The third factor evaluated was “the degree to which the worker’s opportunity for profit or loss was determined.” Hopkins, 545 F.3d at 343. The district court concluded “this factor weighs in favor of employee status,” but the Court of Appeals held otherwise. Parrish, 280 F. Supp. 3d at 966. Premier’s employees were paid even if they were not working on a project. The employees also received “a day bonus for each day they were on the job,” a “car allowance,” a “per diem,” and benefits. On the other hand, Premier’s independent contractors were “reimbursed mileage to and from the job” and received a daily rate for pay. Parrish, Civil Action  No. 17-51089. Hence, independent contractor status was appropriate.
  4. The fourth factor evaluated was “the skill and initiative required in performing the job.” Hopkins, 545 F.3d at 343. The district court concluded “this factor was neutral” while the Court of Appeals held that it favored independent contractor status. Parrish, 280 F. Supp. 3d at 967. The Court said the plaintiffs were “highly skilled individuals who performed their directional drilling tasks using their own discretion, giving way for independent contractor status.” Id. at 966-97.
  5. The final Silk factor evaluated was “the permanency of the relationship.” Hopkins, 545 F.3d at 343. The district court and the Court of Appeals concluded this “factor weighed in favor of independent contractor status.” Parrish, 280 F. Supp. 3d at 968.  The district court looked at the total length of the relationship between Premier and Plaintiffs, and stated: “where a plaintiff works for a defendant for ten months, the engagement begins to resemble an employment relationship.” Carrell v. Sunland Constr., Inc., 998 F.2d 330, 332 (5th Cir. 1993). The Court of Appeals noted whether workers have “previously served as employees and are performing essentially the same functions as independent contractors.” Parrish, Civil Action No. 17-51089. Although Defendant contended Plaintiffs could have worked for other directional-drilling companies, the analysis focused on the economic reality. See Hopkins, 545 F.3d at 346. This court considered whether the work was on a “project-by-project basis, and it was.” Carrell, 998 F.2d at 332. Accordingly, this weighed heavily in favor of independent contractor status.

Were you classified as an independent contractor and denied overtime pay? If this describes you, consider speaking with an experienced overtime attorney. Josh Borsellino is an experienced attorney that fights for the rights of workers. He offers free consultations and works on a contingency basis meaning that he does not get paid unless you get paid. Call him today at 817.908.9861 or 432.242.7118.