Hobbs v. Petroplex Pipe & Constr., Inc.

• Decision Date: 10 January 2020
• Docket Number: No. 19-50350,19-50350
• Citation: 946 F.3d 824
• Parties: Joseph HOBBS, Individually And On Behalf Of All Others Similarly Situated; Drake Feeney, Individually And On Behalf Of All Others Similarly Situated, Plaintiffs - Appellees v. PETROPLEX PIPE AND CONSTRUCTION, INCORPORATED, Defendant - Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

946 F.3d 824

Joseph HOBBS, Individually And On Behalf Of All Others Similarly Situated; Drake Feeney, Individually And On Behalf Of All Others Similarly Situated, Plaintiffs - Appellees

v.PETROPLEX PIPE AND CONSTRUCTION, INCORPORATED, Defendant - Appellant

No. 19-50350

United States Court of Appeals, Fifth Circuit.

FILED January 10, 2020

Christopher Richard Miltenberger, Southlake, TX, for Plaintiffs - Appellees.

Dustin Alan Paschal, Esq., Paul Wesley Simon, Esq., Simon Paschal, P.L.L.C., Dallas, TX, for Defendant - Appellant.

Before JOLLY, SMITH, and COSTA, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

Joseph Hobbs and Drake Feeney are former pipe welders for Petroplex Pipe & Construction, Inc. Hobbs and Feeney brought this suit in federal district court, alleging that although they often worked more than forty hours per week for Petroplex, they were not paid overtime as required by the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq . (FLSA). Following a bench trial, the district court held that Petroplex was liable to Hobbs and Feeney under the FLSA. Petroplex appeals, contesting only the district court’s holding that Hobbs and Feeney were employees instead of independent contractors. We affirm.

I.

Petroplex is an oilfield contractors and services company located in Midland, Texas. Pioneer Natural Resources is one of Petroplex’s clients for whom it provides its services. Beginning in February 2014, Pioneer asked Petroplex to provide pipe welding services at the locations where Petroplex was constructing oil treatment and storage facilities for Pioneer. Petroplex then hired Sam Hardcastle and Joseph Hobbs to perform pipe welding services. Although Hobbs and Hardcastle were initially hired as W-2 employees, Petroplex later reclassified them as independent contractors. This change in classification occurred after discussions between the pipe welders and Petroplex’s president, T.R. Bridges. But nothing in the record indicates that the pipe welders ever signed a contract with Petroplex. Subsequently, Drake Feeney began to work as a pipe welder for Petroplex. Feeney worked for Petroplex from July 2014 to October 2014 and then left to work closer to home. Feeney returned to work for Petroplex in January 2016, and this time stayed with the company until June 2016. During his fourteen-month absence from Petroplex, Feeney provided pipe welding services to other companies. Hobbs worked continuously for Petroplex from February 2014 until January 2017.

Although Hobbs and Feeney worked primarily as pipe welders, in the course of the workweek, they would sometimes perform structural welding, complete maintenance jobs, and operate forklifts for Petroplex. Depending on the year, Petroplex paid the pipe welders at a straight hourly rate of either $70 or $80. The pipe welders testified that they did not negotiate their rate of pay. Typically, the pipe welders would work from 7:00 AM to 5:00 PM six days a week. And while they worked for Petroplex, neither Hobbs nor Feeney provided pipe welding services to other companies. Hobbs and Feeney, however, both testified about instances where they missed work for weeks at a time.

The welders supplied their own trucks, welding machines, beveling machines, grinders, torches, torch hoses, leads, jack stands, hand tools, levels and squares. The welders were also responsible for their own meals and housing. For this purpose, both Hobbs and Feeney purchased campers to live in while working for Petroplex. In their tax returns, Hobbs and Feeney listed themselves as self-employed and took thousands of dollars in deductions on work-related expenses. Petroplex paid for and supplied the welders with consumables, such as oxygen acetylene for coating, welding rods, buffing wheels, grinding disks, face shields, and sanding pads. Petroplex would typically spend about $500,000 on all of its equipment at each construction site. Petroplex would also compensate the pipe welders for the time they spent undergoing testing and certification by Pioneer.

Petroplex set the pipe welders’ hours, and if they showed up late, sent them home for the day. The pipe welders also took their breaks and lunches at the same time as Petroplex’s employees. But unlike Petroplex’s employees, Hobbs and Feeney did not receive an employee handbook or uniforms. At first, Bridges was the person who oversaw the pipe welders and gave them instructions, such as which job assignments to complete each day. Over time, however, Hardcastle took on a supervisory role. After assuming this role, Hardcastle would divide up job assignments among the pipe welders, pull measurements on the welds, provide diagrams for the pipe welders, and send the pipe welders home when they showed up to work late. Hobbs’s relationship with Petroplex ended after he showed up to work late and got into an argument with Hardcastle over Hobbs’s attitude. Feeney’s second stint with Petroplex ended after Hardcastle indicated that Petroplex was running out of work for him.

Hobbs and Feeney filed a FLSA collective action, alleging that Petroplex improperly classified them as independent contractors and that they should have been paid overtime for hours worked in excess of forty hours per week.¹ The district court conducted a bench trial on September 4, 2018. Following the bench trial, the district court issued findings of fact and conclusions of law in which it held that the pipe welders were employees of Petroplex and that Petroplex was liable for violating the FLSA. The district court then entered final judgment in the amount of $101,600 in favor of the pipe welders. This timely appeal followed.

II.

The FLSA requires employers to pay employees at least one-and-one-half times the regular hourly rate for hours worked in excess of forty hours per week. See 29 U.S.C. § 207(a)(1). Independent contractors are exempt from such requirement. In determining employee/independent contractor status, the "relevant question is whether the alleged employee so economically depends upon the business to which he renders his services, such that the individual, as a matter of economic reality, is not in business for himself." Thibault v. Bellsouth Telecomms., Inc. , 612 F.3d 843, 845 (5th Cir. 2010). This court utilizes "five non-exhaustive factors" to guide this inquiry. See Hopkins v. Cornerstone Am. , 545 F.3d 338, 343 (5th Cir. 2008). These "economic realities" or Silk² factors are: "(1) the degree of control exercised by the alleged employer; (2) the extent of the relative investments of the worker and the alleged employer; (3) the degree to which the worker’s opportunity for profit or loss is determined by the alleged employer; (4) the skill and initiative required in performing the job; and (5) the permanency of the relationship." Id. "No single factor is determinative. Rather, each factor is a tool used to gauge the economic dependence of the alleged employee, and each must be applied with this ultimate concept in mind." Id. (internal citations omitted).

Because the district court resolved this case following a bench trial, we review the district court’s historical findings of fact for clear error. See Brock v. Mr. W. Fireworks, Inc. , 814 F.2d 1042, 1044 (5th Cir. 1987) (citing Fed. R. Civ. P. 52(a) ). The district court’s findings as to the Silk factors are "based on inferences from fact and thus are questions of fact" that are also subject to the clearly erroneous standard of review. See id. But the district court’s "ultimate determination of employee status is a finding of law subject to de novo consideration by this court." Id. at 1045.

"[A] finding is ‘clearly erroneous’ when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City , 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (quoting United States v. U.S. Gypsum Co. , 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948) ). However, "[i]f the district court’s account of the evidence is plausible" in the light of the entire record, this court "may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently." Id. at 573–74, 105 S.Ct. 1504.

III.

The district court found, based on the underlying historical facts, that four of the Silk factors—control, investment, opportunity for profit and loss, and permanency—weighed in favor of employee status. The remaining factor—skill and initiative—it found to be neutral. We review those findings, keeping in mind that Brock requires us to afford the district court significant deference.

A.

We first consider the degree of control Petroplex exercised over the pipe welders. "Control is only significant when it shows an individual exerts such control over a meaningful part of the business that [the individual] stands as a separate economic entity." Parrish v. Premier Directional Drilling, L.P. , 917 F.3d 369, 381 (5th Cir. 2019) (quoting Usery v. Pilgrim Equip. Co., Inc. , 527 F.2d 1308, 1312–13 (5th Cir. 1976) ). The relevant determination is whether "the worker has a viable economic status that can be traded to other companies, keeping in mind that lack of supervision of the individual over minor regular tasks cannot be bootstrapped into an appearance of real independence." Id. (cleaned up).

The district court found that this factor weighed in favor of employee status. This finding was not clearly erroneous. It is true, however, that Petroplex did lack control over certain aspects of the pipe welders’ work. For example, Pioneer determined the specifications for the pipe welders’ work and inspected the welding, not Petroplex. But overall, the record supports the district court’s finding that the degree of control factor weighs in favor of employee status. First, there is evidence that Petroplex regularly assigned the pipe welders’ specific tasks and the hours to be...