Parrish v. Premier Directional Drilling, L.P.

• Decision Date: 28 February 2019
• Docket Number: No. 17-51089,17-51089
• Citation: 917 F.3d 369
• Parties: William PARRISH; Joshua D. Ellestad; Mario Alfaro; Thomas J. Beckett; Matthew S. Robbins, Plaintiffs - Appellees v. PREMIER DIRECTIONAL DRILLING, L.P., Defendant - Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

917 F.3d 369

William PARRISH; Joshua D. Ellestad; Mario Alfaro; Thomas J. Beckett; Matthew S. Robbins, Plaintiffs - Appellees

v.PREMIER DIRECTIONAL DRILLING, L.P., Defendant - Appellant

No. 17-51089

United States Court of Appeals, Fifth Circuit.

FILED February 28, 2019

Russell S. Post, Parth Sudhir Gejji, Beck Redden, L.L.P., Houston, TX, Richard J. Burch, Matthew Scott Parmet, Esq., Bruckner Burch, P.L.L.C., Houston, TX, Karson Thompson, Beck Redden, L.L.P., Austin, TX, for Plaintiffs - Appellees.

Annette Agius Idalski, Chamberlain, Hrdlicka, White, Williams & Aughtry, Tax Controversy, Atlanta, GA, Steven Jon Knight, Chamberlain, Hrdlicka, White, Williams & Aughtry, Houston, TX, for Defendant - Appellant.

Raffi Melkonian, Wright, Close & Barger, L.L.P., Houston, TX, for Amici Curiae NEW TECH GLOBAL VENTURES, L.L.C., TIM RASBERRY, NEAL HEALTH, BRIAN HANCOCK and PAUL WISHNEWSKY,

Before SMITH, BARKSDALE, and HO, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

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), 29 U.S.C. §§ 201 – 19. At issue are the district court’s determining, as a matter of law: plaintiffs were employees, not independent contractors; and a three, instead of two, year limitations period for awarding damages was applicable, but without ruling Premier acted willfully. VACATED and RENDERED.

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 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 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 29 U.S.C. §§ 206, 207, 215(a)(2), and alleging Premier did this "knowingly, willfully, or in reckless disregard". The complaint requested relief in the form of, inter alia , unpaid compensation.

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. , 280 F.Supp.3d 954, 975 (W.D. Tex. 2017).

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 , 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947). Parrish , 280 F.Supp.3d at 961–70. As discussed infra , the court concluded one factor supported IC status; two, employee status; and two were neutral. Id. And, as is standard, it also considered factors not explicitly part of the Silk test. Id. at 968–69.

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". Id. at 969. Using a three-year limitations period, the court awarded plaintiffs $ 363,422.00: $ 181,711.00 in compensatory, and $ 181,711.00 in liquidated, damages. Id. at 975. (The court did not make a willfulness finding for applying the three-year period. See generally id. FLSA claims are "subject to a two-year [limitations] period for...