The face that sunk a lawsuit?

In my house, we sometimes have bizarre but short conversations about job functions.  A recent example:

Lindsay: I think I want to do a job that helps people.

Andy: Doesn’t every job help people?

Me: Not executioner.  

This post is about a case involving directional drilling consultants.  And while that sounds like the job title of a scene director in the porn industry, it’s actually a job involving subterranean oil and gas exploration.  Directional drilling consultants (DDs) advise drilling companies how to aim their directional drills when drilling a well that starts down a vertical path, then switches to horizontal.  This allows the company to drill discretely in areas away from home.  Like Josh Duggar.  

In this recent case, DDs challenged their classification as independent contractors, alleging that under the Fair Labor Standards Act, they were really employees and should have received overtime pay.  

The Fifth Circuit Court of Appeals applied the Economic Realities Test, ruling that the DDs were properly classified as contractors.  The Court looked at five factors:

1. Right to Control.  The court ruled that the drilling company provided some direction, but did not tell the DDs how to do their jobs. DDs were required to complete reports and attend safety training, but they could turn down jobs without consequence. On control, there were some facts weighing in each direction. The court ruled that this factor was, on net, neutral.
2. Relative Investments of the Workers and Alleged Employer.  The court noted that the company made huge investments in the drilling operation compared to the DD.  The court acknowledged the disparity but found it of little importance since, in the oil drilling industry, such extreme discrepancies are expected. 
3. Opportunity for Profit or Loss by the Worker. Here’s where things got interesting. The DDs claimed profits and losses from their drilling expeditions on their tax returns. The court seemed particularly swayed by the fact that one of the DDs partially offset his $190,000 in directional drilling profits with losses from his goat farm. The court also seemed swayed by the fact that this directional driller had the option to work at his goat farm any time he did not feel like directionally drilling. The court determined that this factor weighed in favor of contractor status. The guy’s goat farm may have lost him the case.
4. Skill and Initiative Required in Performing the Job. Directional drilling is a highly skilled speciality. As you can imagine. This factor supports contractor status.
5. Permanency of the Relationship. The court seemed particularly swayed by the fact that the work was on a project-by-project basis. This fact weighed in favor of contractor status, even though the DDs had been performing projects for the same company for many months.

Weighing the factors, the court ruled that the DDs were properly classified as independent contractors.

I read another post about this case. The authors called it a blueprint for how to classify an independent contractor. Not even close. This could have gone both ways. In fact, it did. The federal trial court judge granted summary judgment for the plaintiffs, finding that as a matter of law, the DDs were employees. The Fifth Circuit Court of Appeals looked at the same set of facts and reversed, ruling that as a matter of law, the DDs were independent contractors. Either court could have ruled it was too close a call and that a jury had to decide, but neither did. Both thought it was clear — in opposite directions.

These cases are rarely clear, and this one isn’t either.  The drilling company had some DDs that were contractors and others that were employees. They did the same thing.

The company had taken some of its employee DDs and reclassified them as employee DDs.

There were lots of facts in this case that weighed in favor of employee status, and this is hardly a blueprint for how to classify independent contractors.  In fact, I would say read this case with caution. The case is entertaining in its reliance on the use of a goat farm to sink the plaintiffs’ claims, and the plaintiffs’ job has a funny name, but these are unintentionally entertaining tidbits and aside from them, the case is anything but a blueprint for how to properly classify independent contractors.

It is a good reminder, though, that these cases are highly unpredictable. Like the direction of conversations in my house.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.