A federal appeals court in New Orleans overturned a lower court’s decision and found that directional drilling engineers can be classified as independent contractors. The Feb. 28 ruling by the US Fifth Circuit Court of Appeals established that directional drillers employed by Houston-based Premier Directional Drilling LLC could be independent contractors not covered by federal overtime requirements and other employee benefits.
“This case is particularly important to the oil industry, where the use of highly compensated independent contractors is essential and commonplace,” Premier Pres. Michael Kennedy said.
Premier’s lead counsel Annette A. Idalski, who directs the national labor and employment group at the Chamberlain Hrdlicka law firm in Atlanta, said, “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.”
The ruling sets a binding precedent within the Fifth Circuit for decided, pending, and future wage and hour cases, validating the oil and gas industry’s use of contract workers and protecting companies against future litigation, Idalski said. “Oil and gas companies can now maintain contract classification for workers and preserve their business model without fear,” she said.
Premier, which has used independent contractors to some extent since it was started in 2012, had to reduce its employee workforce to 30 employees from 150 when there was a big downturn 3 years later, the appeals court said. But some, while laid off, were reclassified as independent contractors who could accept or refuse assignments and negotiate their pay.
The appeals court recognized this distinction when it overturned a July 2017 US District Court for West Texas finding that the five independent contractor plaintiffs, who sued the previous year, were entitled to overtime and other employee benefits.
The Feb. 28 finding acknowledged areas where there was no difference between Premier’s employees and the independent contractors it hires. Both are supervised by a coordinator, undergo mandatory safety training, and must follow the company’s drug and alcohol policies in the workplace. The company also provides fire retardant clothing if a worker does not have it already.
“The rate of daily pay for an [independent contractor] working for Premier could be quite high,” the appeals court said. “While the range of pay varied, based on the time period, it could well exceed $1,000/day, depending on the [independent contractor’s] level of classification.”
Contact Nick Snow at [email protected].