Fifth Circuit Holds Directional Driller Is An Independent Contractor Rather Than An Employee For FLSA Purposes

• Published date: 01 June 2022
• Subject Matter: Employment and HR, Energy and Natural Resources, Employee Benefits & Compensation, Energy Law
• Law Firm: Littler Mendelson
• Author: Ms Allison C. Williams and Kelli C. Fuqua

On May 11, 2022, the Fifth Circuit issued its opinion in Hargrave v. AIM Directional Services, L.L.C., giving a big win to energy-sector companies by concluding that a directional driller was an independent contractor rather than an employee covered by the FLSA.

To reach its conclusion, the court relied heavily on its 2019 decision in Parrish v. Premier Directional Drilling, L.P., 917 F.3d 369 (5th Cir. 2019), which also involved a contract directional driller.

The plaintiff in Hargrave was a directional driller responsible for guiding the path of drilling and providing advice on how to most effectively implement the well plan provided by AIM's clients. Although AIM hires some directional drillers as employees, it also brings on "independent contractors 'as needed to meet the demands of fluctuating rig counts,' either directly or through third-party staffing companies." Regardless of their classification as an employee or independent contractor, "[a]ll directional drillers have essentially the same duties and responsibilities while on the job."

Importantly, though, directional drillers brought on as independent contractors are free to accept or reject jobs as they please, while employees are not. Similarly, independent contractors are not required to sign non-compete or non-disclosure agreements, while employees are. Moreover, AIM's employees receive a salary, while the independent contractors are paid on a day-rate basis. "Independent contractors also receive none of the benefits and allowances provided to AIM employees, aside from a mileage reimbursement."

The plaintiff was classified as an independent contractor by AIM. The plaintiff filed suit alleging this classification was improper and that, instead, he was an employee entitled to overtime under the FLSA and the New Mexico Minimum Wage Act. The plaintiff subsequently abandoned his New Mexico Minimum Wage Act claim on appeal and, as a result, those claims were not the subject of the court's analysis.

In determining that the plaintiff's classification as an independent contractor was proper, the court analyzed the plaintiff's relationship with AIM under the factors set out by United States v. Silk, 331 U.S. 704 (1947). Specifically, the court determined:

1. As to control, the court looked at "whether the worker has a viable economic status that can be traded to other companies." The court concluded that AIM did not dictate how the plaintiff completed his calculations. Although AIM set the "method and...