Parrish v. Premier Directional Drilling, L.P.
Parrish v. Premier Directional Drilling, L.P.
Opinion
*375
Premier Directional Drilling, L.P., challenges the summary judgment awarded William Parrish, Joshua D. Ellestad, Mario Alfaro, Thomas J. Beckett, and Matthew S. Robbins pursuant to the Fair Labor Standards Act (FLSA),
I.
Premier, which specializes in directional drilling for oil, is headquartered in Houston, Texas. As described by Premier's vice president: "Directional drilling is the process of drilling a well ... down a path that begins vertical to the surface and, then, at the 'kickoff point' drills at an angle horizontal to the surface". And, as noted by one of Premier's employees, sometimes the target oil is "thousands of yards below ground and up to several miles distant from the drilling rig location".
Directional drilling is useful in avoiding obstructing subterranean objects, and can lead to efficient oil extraction. As part of the directional-drilling process, Premier utilizes directional-driller-consultants (DD) and measurement-while-drilling-consultants (MWD).
DDs and MWDs have different jobs. A DD advises the oil company's driller how best to effectuate the well plan-provided to the DD-that involves a directional drill. As indicated, oil companies perform the drilling themselves. Being contrary to Premier's policy to do so, DDs generally do not operate the drill.
A MWD takes measurements during the directional drill that are provided to the DD and provide a basis for the DD's opinion. An error in the directional-drilling advice by the DD can lead to Premier's losing a significant amount of money-sometimes hundreds of thousands of dollars.
Plaintiffs are DDs. Some DDs are classified by Premier as employees; some, independent contractors (IC). Plaintiffs claim they were mis-classified as ICs, and are, instead, employees to whom the FLSA applies.
Premier utilizes unrelated staffing companies to hire ICs. Those companies enter into arrangements with ICs, which may include non-disclosure agreements, and are also the entities through which Premier paid plaintiffs' consulting businesses. (Plaintiffs created consulting businesses *376 through which they operate as putative ICs.)
Again, Premier's DDs advise it how to perform a directional drill, which it undertakes. Premier, formed in 2012, has always used ICs to some extent. But, according to Premier's CFO, "[i]n 2015 there was a drastic downturn in the oilfield industry and Premier was forced to significantly reduce its workforce from 150 employees to just 30". Then-Premier employees, plaintiffs Alfaro and Robbins were laid-off that year. But Premier did not let them go, entirely. Both Alfaro's and Robbins' termination paperwork show Premier was "[s]wapping" or "mov[ing]" them to become ICs. Plaintiffs Parrish, Beckett, and Ellestad worked as putative ICs for Premier, but it does not appear they were subject to the 2015 transition.
Not surprisingly, IC DDs and employee DDs have essentially the same job duties. Premier's vice president agreed that "the only difference between an [IC DD] and an employee [DD] ... is their ability to turn down work" "[a]nd negotiate their pay".
All DDs are supervised by a coordinator, but also perform their task with little to no intervention. And, all DDs undergo mandatory safety training. Premier has a drug-and-alcohol policy, and ICs must comply with drug testing if required by Premier. All DDs have to use the same WinSERVE program (computer program used during directional drilling), which has an annual cost somewhere between $ 4,000 to $ 5,000. Regardless if an IC had WinSERVE on his own computer, Premier would have a copy of the WinSERVE program available at the job-site for use by employees and ICs.
Employees, as salaried workers, could not decline to work a project. ICs could decline to do so, but accept others. For example, Parrish would turn down jobs when he was out of town, and Premier would offer him other jobs later. Additionally, ICs would coordinate with each other or Premier when they left a rig site. For an employee to request vacation time, he had to complete a form; ICs, to call Premier.
IC DDs often bring their own tools, but not always. For example, Premier ensured its drill sites had a laptop with the appropriate software available for use. Parrish was one putative IC who used a Premier-provided laptop. Premier also ensured its DDs had fire-retardant clothing, if they did not have it already. It is unclear the extent to which this clothing featured Premier's logo or designated who was an IC.
Premier also provides the MWDs to the DDs; according to Premier's CEO, MWDs are "traditionally" paid by Premier. As noted earlier, MWDs provide the DDs the measurement information often crucial to the DDs' ability to perform their job. While MWDs are not needed on some drills, they are essential on others. MWD services were present on most of Premier's directional-drilling projects. The equipment used by MWDs is very expensive, and not provided by DDs. For example, the EVO tool (utilized by MWDs to obtain data from the well) cost around $ 800,000.
Premier's ICs are paid differently from its employees. According to Premier's CFO, "[e]mployee [DDs] are paid a salary plus a day bonus for each day they're on the job", "car allowance", "per diem" and "benefits". On the other hand, IC DDs are paid by the job, but receive mileage for travel. According to Premier's CFO, they are "covered by Premier's general liability insurance while they're on the job".
While employees could be promoted within Premier, plaintiffs could not. Nevertheless, plaintiffs, as putative ICs, could be elevated to a higher pay classification based on experience. For example, if an IC
*377 advanced from Contract-DD2 to Contract-DD3, on the pay chart effective 20 January 2015, the IC would receive $ 1,170, instead of $ 1,080, per day. The decision whether to move an IC up the pay scale was made by a Premier manager. While plaintiffs could hypothetically negotiate for higher pay, it is unclear how often they did so.
Similarly, Premier's DD employees' pay scale was listed in the same format, even on the same page, as the ICs' pay scale. Employees could similarly be upgraded from DD-2 to DD-3 and receive a higher base salary and daily bonus. These pay scales were amended over time.
Premier did not use a bidding system to hire ICs. Instead, it would select which IC it wished to use for the job, and a coordinator would call to offer the project. Occasionally, ICs would call Premier when "hungry" and request work, even if paid less.
In May 2016, Parrish filed this FLSA collective action against Premier, claiming it "misclassified [him and all others similarly situated] as independent contractors" and failed to properly compensate them for overtime, as required by
Plaintiff was granted leave to seek additional similarly-situated opt-in plaintiffs. But, as of the court's awarding summary judgment, there were only four opt-in plaintiffs; it appears approximately 90 received notice. (Seven other opt-in plaintiffs withdrew their consent.)
The parties in July 2017 filed cross-motions for summary judgment. That November, the district court,
inter alia
, granted plaintiffs' motion and denied Premier's.
Parrish v. Premier Directional Drilling, L.P.
,
In its comprehensive and detailed opinion, the district court used the standard format-as is done in this opinion-for evaluating five factors relating to the employment-status determination, as provided in
United States v. Silk
,
Based on its analysis of all of the factors, the court concluded plaintiffs were employees: "While there are certainly facts supporting the classification of [p]laintiffs as [ICs], the fact that employee DDs and IC DDs were treated the same, and supervised in the same manner, with no appreciable differences other than how they were compensated, factors most heavily in the [c]ourt's analysis here".
II.
As addressed
infra
, whether a worker is an employee for FLSA purposes is a question of law.
E.g.
,
Brock v. Mr. W Fireworks, Inc.
,
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In evaluating such a motion, "[t]he evidence should be viewed in the light most favorable to the nonmoving party, and this court should 'refrain from making credibility determinations or from weighing the evidence' ".
Gray v. Powers
,
Importantly, "the mere existence of
some
alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no
genuine
[dispute] of
material
fact".
Anderson v. Liberty Lobby, Inc.
,
"As to materiality, the substantive law will identify which facts are material."
Our court has addressed the various fact and legal questions present in an FLSA action.
Brock
,
In
Brock
, our court noted: "There are ... three types of findings involved in determining whether one is an employee within the meaning of the Act".
Based on finding "labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers", Congress enacted the FLSA in 1938.
"Given the remedial purposes of the legislation, an expansive definition of 'employee' has been adopted by the courts."
Usery v. Pilgrim Equip. Co., Inc.
,
The FLSA requires overtime pay when "a workweek [is] longer than forty hours".
"Generally, FLSA claims are subject to a two-year statute of limitations, however the limitations period is three years for willful violations."
Steele v. Leasing Enters., Ltd.
,
Plaintiffs must prove four elements to make their
prima facie
case: "(1) that there existed an employer-employee relationship during the unpaid overtime periods claimed; (2) that the employee engaged in activities within the coverage of the FLSA; (3) that the employer violated the FLSA's overtime wage requirements; and (4) the amount of overtime compensation due".
Johnson v. Heckmann Water Res. (CVR), Inc.
,
Other than challenging the above-discussed three-year limitations period used for awarding damages, which, as discussed, we need not reach, Premier's appeal focuses solely on the first of the above elements: whether "there existed an employer-employee relationship".
In FLSA actions, our court primarily uses the earlier-referenced
Silk
factors to guide the employee
vel non
analysis.
See generally
Silk
,
*380
As noted, "[n]o single factor is determinative".
Instead, the focus is on "an assessment of the 'economic dependence' of the putative employees, the touchstone for this totality of the circumstances test".
Brock
,
A.
First considered is whether, in the light of the summary-judgment record at hand, this action is appropriate to be decided by summary judgment.
See generally
Anderson
,
As noted, Premier urges our vacating the judgment for plaintiffs and rendering judgment in its favor. In the alternative, it urges remand for trial. Plaintiffs, likewise, assert this action is appropriate for a summary judgment, which they maintain, should be affirmed.
Like every FLSA action in a similar posture, the instant cross-motions for summary judgment are "very fact dependent".
E.g.
,
Carrell
,
*381
In other words, after reviewing the record, we cannot discern any fact that is both genuinely disputed and could change the outcome of this proceeding (no genuine dispute of material fact, as defined
supra
). There being no genuine dispute of material fact, we turn to the second prong for summary-judgment review: whether plaintiffs are, or Premier is, "entitled to judgment as a matter of law".
Anderson
,
B.
Each of the five, non-exhaustive Silk factors is evaluated, followed by consideration of other factors.
1.
Again, the five
Silk
factors are: "degree[ ] of control, opportunities for profit or loss, investment in facilities, permanency of relation[,] and skill required in the claimed independent operation".
Silk
,
a.
First considered is "the degree of control exercised by" Premier over plaintiffs.
Hopkins
,
"Control is only significant when it shows an individual exerts such a control over a meaningful part of the business that [the individual] stands as a separate economic entity."
Usery
,
Premier relies upon plaintiffs' being "free to accept or reject any project" and "controll[ing] the manner and method of their work". Plaintiffs respond: "Premier demanded [they] comply with its company policies and procedures", including requiring "special permission" to simply leave the workplace and mandating certain reports be filed "in Premier's preferred format". Additionally, plaintiffs assert a Premier employee instructs them "where their assigned job is and when they need to report for duty", what the well plan is, what equipment will be at the drill, who can operate the drill, and determines when a pay raise is in order.
As stated, the control factor leans in favor of IC status. Premier did not dictate how plaintiffs completed the directional-drilling calculations. This is similar to the situation in
Thibault
, in which the worker's supervisors "never specified how [he] should do [his primary task:] splicing" high-voltage cables.
Thibault
,
Additionally, although plaintiffs were provided an already-designed well plan,
*382
they made that plan work. In
Thibault
, the company provided the "blueprints", yet the worker was not held to be an employee.
Nor are we persuaded by the mandated format of reports. At the very least, turning in reports in the way a client wants them is good-client service. In any event, "meeting clients' specifications and keeping clients informed of job progress is consistent with the 'usual path' of an [IC]".
Scantland v. Jeffry Knight, Inc.
,
The district court concluded this factor was neutral for primarily three reasons.
Regarding the work schedule, plaintiffs did have certain assigned shifts; but, they did not have to accept a project. On occasion, Premier's ICs turned down projects without negative repercussion.
Further, it is quite understandable why Premier would need to know which DDs were working at any given time. DDs had to work in concert with the rest of the drilling operation. According to a declaration from Premier's vice president, DDs have to "make adjustments to the well plan given what the drill experiences in real time". Clearly, they could not show up at the drill site whenever they pleased. Given the cooperation required between DDs and drill operators, Premier had to know when DDs would be on-site.
Nor were plaintiffs employees because of safety training and drug testing. To the contrary, requiring everyone working at an oil-drilling site to be educated on safety protocol, and not be under the influence of illegal drugs, is required for safe operations. This is consistent with the Occupational Safety and Health Act: Premier had a duty to "furnish ... a place of employment ... free from recognized hazards that are causing or are likely to cause death or serious physical harm to [its] employees".
Although requiring safety training and drug testing is an exercise of control in the most basic sense of the word,
see Control
, Black's Law Dictionary (10th ed. 2014) (defining control as,
inter alia
, "the power or authority to manage, direct, or oversee"), and something our court has considered previously,
see
Hathcock v. Acme Truck Lines, Inc.
,
Neither does the existence of the non-disclosure agreement.
Talbert v. Am. Risk Ins. Co.
,
b.
The second factor evaluated is "the extent of the relative investments of the worker and the alleged employer".
Hopkins
,
Our court uses a side-by-side comparison method in evaluating this factor.
Hopkins
,
Premier urges our circuit to abandon the side-by-side comparison of the worker's investments to the employer's investments, contending the comparison method was never mentioned in
Silk
. In
Silk
, the Court simply referenced "investment in facilities".
Silk
,
We need not decide whether we even have the option to abandon the comparison, with doing so arguably being violative of our court's rule of orderliness: an earlier decision by our court cannot be overturned absent a change in law or Supreme Court or en-banc decision.
E.g.
,
Vaughan v. Anderson Reg'l Med. Ctr.
,
In the 1976
Usery
opinion, the investments of the employer and the laundry workers were compared.
More recent precedent has continued this long-accepted methodology.
See
,
e.g.
,
Hopkins
,
Nonetheless, the side-by-side comparison approach does not always necessitate a holding of employee status. In
Carrell
, our court held plaintiffs were ICs despite the company's "obviously significant" "overall investment in each pipeline construction project".
Obviously, Premier invested more money at a drill site compared to each plaintiff's investments.
As stated, this factor merits little weight in the light of the other summary-judgment-record evidence supporting IC-status.
*384 c.
The third determination is "the degree to which the worker's opportunity for profit or loss is determined by the alleged employer".
Hopkins
,
In evaluating this factor, it is important to determine how the workers' "profits [depend] on their ability to control their own costs".
Carrell
,
Premier relies heavily on plaintiffs' tax returns, in which they reported business profits and attendant expenses. As detailed below, some of the claimed expenses, as well as the profits, were quite significant. (Premier conceded at oral argument that no plaintiff lost money when considering solely the profits and expenses stemming from work with Premier.)
Premier has also emphasized plaintiff Ellestad's goat farm, which offset $ 190,000 in profits earned from Premier. Citing
Thibault
, Premier contends plaintiffs' additional income and losses from other business ventures is relevant. In
Thibault
, our court considered plaintiff's professional-racing business venture, sales company, and commercial rental property when evaluating whether plaintiff was employed by defendant as a splicer.
Plaintiffs respond by referring to
Brock
. There, our court determined the minimal income gained by plaintiffs from selling items in addition to their employer's product (fireworks) was irrelevant.
Brock
,
On this record, Thibault is more on-point. Accordingly, we consider the losses sustained by plaintiffs' enterprises, such as the goat farm, as a part of the overall analysis of how dependent plaintiffs were on Premier.
In short, plaintiffs did have enough control over their profits and losses to have this factor support IC status. Although Premier had a set pay schedule for ICs based on their experience, plaintiffs made decisions affecting their expenses.
Thibault
,
And, they did not receive any pay from Premier when they were not working on one of its projects. This is unlike Premier's employees, who 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 ICs (including plaintiffs as putative ICs) were "reimbursed mileage to and from the job" and received a daily rate for pay. (Parrish's payment records, generated by one of the staffing companies used by Premier, indicate his consulting company also received bonuses stemming from his work done at Premier.)
The rate of daily pay for an IC working for Premier could be quite high. While the range of pay varied, based on the time period, it could well exceed $ 1,000 per day, depending on the IC's level of classification. For example, Parrish's consulting firm, Parrish Consulting LLC, earned *385 $ 230,033.30 in 2013. This figure included the per-day pay, a bonus, and mileage. In 2014, Parrish Consulting LLC earned even more-$ 279,777.31. In 2015, Parrish Consulting LLC reported a little over $ 40,000 in gross receipts and took over $ 30,000 in deductions.
Three other plaintiffs show a similar story (Robbins' tax returns are not in the record). In 2014, JD Ellestad Inc. reported almost $ 190,000 in gross receipts while also taking thousands of dollars in deductions through, inter alia , repairs/maintenance, depreciation, and employee-benefit programs. In 2015, Beckett's business, Beckett Energy Services LLC, reported over $ 120,000 in gross income with total expenses exceeding $ 30,000 covering deductions for, inter alia , travel, meals, and entertainment. Alfaro's 2015 taxes showed he earned over $ 130,000 in wages while also claiming losses in excess of $ 26,000 (such as depreciation, insurance, and travel).
For this factor, plaintiffs also point to their inability to subcontract as evidence of employee status. In support, they cite
Hopkins
, where our court noted the employer "controlled the hiring, firing, and assignment of subordinate agents", in ruling this "factor weigh[ed] in favor of employee status".
Hopkins
,
d.
Fourth considered are "the skill and initiative required in performing the job".
Hopkins
,
As a part of this inquiry, whether plaintiffs have "some unique skill set, or some ability to exercise significant initiative within the business" is, for obvious reasons, evaluated.
Hopkins
,
But, "[r]outine work which requires industry and efficiency is not indicative of independence and nonemployee status".
Usery
,
i.
First considered is plaintiffs' skill. The district court correctly noted plaintiffs "are highly skilled individuals who performed their directional drilling tasks using their own discretion".
We detail throughout this opinion, however, the numerous differences between employees and plaintiffs, and decline to require plaintiffs, as putative ICs, be more skilled than their employee counterparts. By analogy, Premier contends "[a] company with a highly-skilled general counsel can still hire an outside lawyer as an [IC], even if the general counsel is a more skilled lawyer". The same principle applies here. Plaintiffs' high-skill level, understood in the light of their complicated work, weighs heavily in favor of IC status.
ii.
Next considered is initiative. Plaintiffs contend: "Premier eliminated all meaningful avenues for exercising initiative by using a no-bid project assignment system, supplying all necessary personnel and equipment, paying drillers using a fixed, experience-based pay scale, tying that day rate to a fixed 12-hour workday, and preventing [p]laintiffs from subcontracting their work".
Additionally, plaintiffs point to
Rutherford Food Corp. v. McComb
,
Premier contends plaintiffs did show initiative because they: "could ask for more money"; could "advertise their businesses to and work for Premier's competitors"; invested "in trucks, computers, clothing, and equipment"; and managed their own finances efficiently. On balance, we are less persuaded plaintiffs demonstrate the sort of initiative compelling nonemployee status. After all, at issue is not what plaintiffs could do, only what they did.
Brock
,
Nonetheless, this is viewed by the totality of the circumstances.
Brock
,
e.
The fifth, and final
Silk
factor to be evaluated is "the permanency of the relationship".
Hopkins
,
In evaluating this factor in
Carrell
,
Next, the total length of the relationship between Premier and plaintiffs is considered.
Carrell
,
Plaintiffs contend the court erred by giving some of them credit for time spent as Premier employees (in addition to time spent as Premier's putative ICs), but not giving that same credit to the other plaintiffs. But even under plaintiffs' calculations, only three of the five worked for Premier for ten months or longer. In the past, our court has noted whether workers have "previously served as ... employees and are performing essentially the same functions as [ICs]" in considering the permanency of the relationship.
Usery
,
Finally, our court considers whether the work was on a "project-by-project basis".
Carrell
,
Plaintiffs contend the up-and-down nature of the oil business supports showing the relationship was more, than less, permanent. But, plaintiffs were not paid during the down-period, and there was no guarantee they would receive more work.
Nevertheless, even if more work did come for plaintiffs, both sides have noted plaintiffs' skillset. Such a valuable skillset shows how the permanency of the relationship may, in reality, be not all that permanent.
Cf.
Usery
,
2.
The
Silk
factors being "non-exhaustive", other relevant factors may be in play in an employee
vel non
analysis.
Hopkins
,
a.
First, it considered how the existence of an express agreement contemplating IC status factored into the employee vel non *388 analysis. Id. at 968. Citing well-established precedent from our circuit, the court, correctly, chose not to rely on any contractual agreement. Id.
In
Hopkins
,
Similarly,
how
plaintiffs file tax returns has limited relevance in the economic-reality test.
See
Brock
,
b.
Next, the district court considered the industry standard ("due to the nature of oilfield work, it may be industry standard to employ some workers as [ICs]"), ultimately concluding it did not support IC status.
For the industry standard to be relevant in that fashion, it is best considered as a part of the other
Silk
factors. That is the manner in which it is analyzed in this opinion-as a part of the totality of the circumstances.
c.
Finally, the district court considered the purpose of the FLSA and whether it was intended to cover well-paid, well-trained workers like plaintiffs.
III.
For the foregoing reasons, the judgment is VACATED, and judgment is RENDERED for Premier.
Reference
- Full Case Name
- William PARRISH; Joshua D. Ellestad; Mario Alfaro; Thomas J. Beckett; Matthew S. Robbins, Plaintiffs - Appellees v. PREMIER DIRECTIONAL DRILLING, L.P., Defendant - Appellant
- Cited By
- 168 cases
- Status
- Published