Fifth Circuit Finds Directional Drillers Are Independent Contractors

On February 28, 2019, the United States Court of Appeals for the Fifth Circuit issued an important decision involving whether contract workers in the oil patch were entitled to overtime. In William Parrish, et al. v. Premier Directional Drilling, L.P., No. 17-511089, the Fifth Circuit reversed a trial court decision and rendered judgment in favor of Premier Directional Drilling, L.P. ("Premier"). Following a fact-intensive inquiry, the Fifth Circuit concluded that the directional drillers were not employees and not entitled to overtime under the Fair Labor Standards Act ("FLSA").

The decision provides the oil and gas industry new leverage in contractor misclassification cases and acknowledges certain truths of the unique nature of oil patch work. But while companies in the oil and gas industry defending misclassification litigation in the Fifth Circuit may find some solace in the Court's support of Premier's independent contractor classification, the ruling left unaltered the Fifth Circuit's five-factor test for determining employee status under the FLSA. As such, oil and gas companies should carefully consider what the Court's decision means for their businesses, including evaluating their manpower on a position-by-position basis for services performed in Texas, Louisiana and Mississippi - the states governed by the Fifth Circuit's ruling.

Background. In May 2016, William Parrish filed a lawsuit, claiming that Premier misclassified him as an independent contractor, thus failing to pay him and other similarly situated directional driller consultants overtime compensation under the FLSA. Four other contractors later joined the case, and in July 2017, the parties filed cross-motions for summary judgment. On November 27, 2017, the district court ruled in favor of the contractors, finding they were employees entitled to overtime. See Parrish v. Premier Directional Drilling, L.P., 280 F. Supp. 3d 954 (W.D. Tex. 2017). Premier appealed. The Fifth Circuit reviewed the decision de novo, and reversed and rendered judgment in favor of Premier.

The Fifth Circuit's Analysis. The Fifth Circuit reaffirmed that, in moving for summary judgment on claims for unpaid overtime compensation, plaintiffs must prove four elements to make their prima facie case: (1) an employer-employee relationship existed during the unpaid overtime periods claimed; (2) the employee engaged in activities within the coverage of the FLSA; (3) the employer violated the FLSA's...