The Fifth Circuit Court of Appeals on Feb. 28 concluded that directional drilling engineers can be classified as independent contractors and not employees, validating the oil and gas industry’s use of contract workers and setting a binding precedent in the Fifth Circuit for decided, pending and future wage-and-hour cases.

The case, Parrish v. Premier Directional Drilling, involves directional drillers who had been reclassified as independent contractors during a downsizing by Houston-based Premier Directional Drilling in 2015 due to an oil industry downturn. In 2016, William Parrish filed a Fair Labor Standards Act lawsuit against Premier, claiming it “misclassified [him and all others similarly situated] as independent contractors” and failed to properly compensate them for overtime.

The district court’s prior ruling that the independent contractors were misclassified was based on the “fact that [employee and IC directional drillers] were treated the same, and supervised in the same manner, with no appreciable differences other than how they were compensated.”

Among the factors considered:

  • ICs and employee directional drillers have essentially the same job duties, though ICs are able to turn down work and negotiate their pay.
  • ICs often provide their own tools, though Premier made available at its worksites a laptop with the appropriate software available for use. Premier also would provide fire-retardant clothing if the ICs did not have it.
  • Employees receive a salary plus a bonus for each day they’re on the job, car allowance, per diem, benefits. ICs are paid by the job and receive mileage for travel. ICs also are “covered by Premier’s general liability insurance while they’re on the job.”
  • All workers are supervised by a coordinator, but also perform their task with little to no intervention. And all workers undergo mandatory safety training and are subject to Premier’s drug-and-alcohol policy.

In its reversal, the Fifth Circuit determined these facts weighed more heavily in favor of IC status in five key factors: degree of control, opportunities for profit or loss, investment in facilities, permanency of relation, and skill required in the claimed independent operation.

“The impact of this decision cannot be overstated, as the prior court’s order was crippling the oil and gas industry while enabling a wave of financially devastating litigation. Oil and gas companies can now maintain contract classification for workers and preserve their business model without fear,” said Annette Idalski, lead counsel for Premier Directional Drilling.