Hargrave v. AIM Directional Svcs ( 2022 )

Case: 21-40496 Document: 00516315278 Page: 1 Date Filed: 05/11/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
May 11, 2022
No. 21-40496 Lyle W. Cayce
Clerk
Marcus Hargrave,
Plaintiff—Appellant,
versus
AIM Directional Services, L.L.C.,
Defendant—Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 2:18-CV-449
Before Richman, Chief Judge, and Costa and Ho, Circuit Judges.
Per Curiam:*
Marcus Hargrave alleges that AIM Directional Services, Inc. violated
the Fair Labor Standards Act by failing to pay him overtime. The district
court granted AIM summary judgment, concluding that Hargrave was an
independent contractor rather than an employee covered by the FLSA. We
agree with that conclusion, for largely the same reasons that we reached that
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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result in Parrish v. Premier Directional Drilling, L.P., 917 F.3d 369 (5th Cir.
2019). Accordingly, we affirm.
I.
AIM “provides oil and gas directional drilling, horizontal drilling,
mud-motor drilling, and measurement while drilling services and tools to
various clients.” To conduct its drilling operations, AIM employs
directional drillers. Directional drillers “guide the path of drilling” and
provide advice on how to most effectively implement the well plan provided
by AIM’s clients, which functions as the general guideline for drilling
operations. Directional drillers’ work is complicated, sensitive, and crucial
to AIM’s business.
AIM hires some directional drillers as employees. But it also brings
on independent contractors “as needed to meet the demands of fluctuating
rig counts,” either directly or through third-party staffing companies. All
directional drillers have essentially the same duties and responsibilities while
on the job, irrespective of how they are classified. But unlike AIM’s
employees, directional drillers brought on as independent contractors are
free to accept or reject jobs as they please and are not required to sign non-
compete or non-disclosure agreements. And while AIM’s employees are
salaried, 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.
Marcus Hargrave has been a directional driller since 2006. From
2008 to 2018, he contracted with various oilfield services companies through
his directional drilling consulting firm, Hargrave Oil Field Consulting, LLC.
In 2018, Hargrave interviewed with AIM. In the interview, AIM
informed Hargrave that he would need to work with RigUp, a third-party
staffing company, if he was interested in providing directional drilling
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services to AIM as an independent contractor. Shortly thereafter, Hargrave
began working on directional drilling projects for AIM through RigUp.
While on the job, Hargrave would submit timesheets to RigUp. RigUp would
then pay Hargrave and bill AIM for Hargrave’s services. Hargrave preceded
to work on various projects for AIM from April to November of 2018,
although there were points within that time period “where AIM did not have
work for him” and encouraged him to “look around” for other opportunities.
Hargrave eventually filed this action, alleging that AIM violated the
FLSA and the New Mexico Minimum Wage Act by improperly classifying
him as an independent contractor and failing to pay him overtime. The
district court granted summary judgment to AIM after concluding that
Hargrave was an independent contractor rather than an employee, and
Hargrave timely appealed. 1
II.
We review a district court’s grant of summary judgment de novo,
applying the same standard as the district court. Nola Spice Designs, L.L.C.
v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015). See also Hopkins v.
Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008) (“We review de novo a
district court’s legal conclusion as to employment status in a grant of
summary judgment.”). Summary judgment is appropriate “if the movant
shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
1
On appeal, Hargrave does not challenge the district court’s grant of summary
judgment as to his claim under the New Mexico Minimum Wage Act. He has therefore
abandoned that claim. See Yohey v. Collins, 985 F.2d 222, 224–25 (5th Cir. 1993).
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III.
The FLSA “establishes a standard 40-hour workweek by requiring
employers to pay ‘time and a half’ for any additional time worked.” Hewitt
v. Helix Energy Sols. Grp., Inc., 15 F.4th 289, 290 (5th Cir. 2021) (en banc)
(citing 29 U.S.C. § 207(a)). But “[i]ndependent contractors are exempt
from [this] requirement.” Hobbs v. Petroplex Pipe & Constr., Inc., 946 F.3d
824, 829 (5th Cir. 2020).
To determine whether a given worker is an employee or an
independent contractor, we must focus on “[e]conomic reality rather than
technical concepts.” Goldberg v. Whitaker House Co-op., 366 U.S. 28, 33
(1961) (quotations omitted). In making this assessment, our court generally
uses “five non-exhaustive factors,” known as the Silk factors, to “guide” the
analysis: “(1) the degree of control exercised by the alleged employer; (2)
the extent of the relative investments of the worker and the alleged employer;
(3) the degree to which the worker’s opportunity for profit or loss is
determined by the alleged employer; (4) the skill and initiative required in
performing the job; and (5) the permanency of the relationship.” Parrish, 917
F.3d at 379 (quotations omitted). These “factors should not be applied
mechanically” and “no single factor is determinative.” Id. at 380 (quotations
omitted). See also Carrell v. Sunland Const., Inc., 998 F.2d 330, 334 (5th Cir.
1993) (observing that “most employee-status cases” will have “facts
pointing in both directions”).
A.
We start by assessing the degree of control AIM exercised over
Hargrave. See Parrish, 917 F.3d at 381. “Control is only significant when it
shows an individual exerts such control over a meaningful part of the business
that the individual stands as a separate economic entity.” Hobbs, 946 F.3d at
830 (cleaned up). Thus, the question is “whether the worker has a viable
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economic status that can be traded to other companies.” Id. (quotations
omitted).
When on a job for AIM, the company “did not dictate” how
Hargrave “completed [his] directional-drilling calculations.” Parrish, 917
F.3d at 381. And while at each job he was “provided an already-designed
well-plan,” it was Hargrave that “made that plan work.” Id. at 381–82. As
in Parrish, these facts indicate that “the control factor leans in favor of
[independent contractor] status.” Id. at 381.
Hargrave argues that AIM controlled his compensation because it set
both the “method and rate of [his] pay.” But that alone is unpersuasive given
that Hargrave was “free to accept or reject jobs from AIM” as he pleased.
Hargrave also contends that AIM exercised control over his “schedule and
job assignments” because AIM told him “where to go and when” once he
accepted a job. But again, Hargrave was free to pick and choose which job
assignments to accept. And while AIM did assign Hargrave certain shifts
while on the job, we have previously recognized that this sort of control does
not militate in favor of employee status in this context, as firms like AIM
“need to know” which directional drillers are “working at any given time.”
See id. at 382 (stressing that directional drillers must “work in concert with
the rest of the drilling operation”).
Next, Hargrave stresses that AIM required him “to work the entire
duration of the job assignment himself and precluded him from
subcontracting his work out.” But while “[p]reventing subcontracting is an
exercise of control,” it “is not dispositive here.” Id. at 385. That’s because
it is reasonable “for a company to want to hire a specific person,” particularly
for roles that require “advanced skill and specialized expertise.” Id.
Finally, Hargrave places great emphasis on the fact that AIM forced
him to “comply with . . . safety protocols and procedures,” and “strongly
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encouraged” him to wear “personal protective equipment with the AIM
logo on it” while on the job. But as the district court observed, encouraging
workers “to wear a hard-hat with an AIM logo” and mandating compliance
with “safety policies and procedures that are generally required for safe
operations on an oil-drilling site [is] not the type of control that counsels in
favor of employee status.” See id. at 382.
B.
We now turn to the relative investments of AIM and Hargrave. See
Hobbs, 946 F.3d at 831. This factor “compares the amount the alleged
employer and employee each contribute to the specific job the employee
undertakes.” Thibault v. Bellsouth Telecomms., Inc., 612 F.3d 843, 847 (5th
Cir. 2010).
AIM observes that Hargrave provided his own laptop, office supplies,
safety equipment, and transportation for his work with AIM. However, for
each project Hargrave worked on, AIM provided him with living quarters
and the requisite drilling equipment and computer software. We therefore
agree with the district court that “AIM clearly invested more money in the
directional drilling projects Hargrave worked on.”
But while this factor favors employee status here, we accord it “little
weight, in the light of the nature of the industry and the work involved.”
Parrish, 917 F.3d at 383 (noting that directional drilling firm’s “significant”
investment “at a drill site” was necessary for directional drillers to be “able
to complete the job”).
C.
“The third determination is the degree to which the worker’s
opportunity for profit or loss is determined by the alleged employer.” Id. at
384 (quotations omitted).
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“In evaluating this factor, it is important to determine how the
workers’ profits depend on their ability to control their own costs.” Hobbs,
946 F.3d at 832 (quotations omitted). While AIM had a set day rate for the
directional drillers it contracted with, Hargrave still “made decisions
affecting [his] expenses.” Parrish, 917 F.3d at 384. Indeed, Hargrave admits
that he paid “for some of the vehicles, tools, equipment, and consumables”
necessary to perform his work for AIM. See Carrell, 998 F.2d at 332(welders’ profits hinged on their ability “to minimize welding costs” given
that they were responsible for “all costs associated with . . . their welding
equipment”). Hargrave was then able to deduct these expenses from his
taxes. 2 See Parrish, 917 F.3d at 384–85 (deducting business expenses is
indicative of independent contractor status). Moreover, unlike AIM’s
employees, Hargrave did “not receive any pay from” AIM when he was not
“working on one of its projects.” Id. at 384. This all militates in favor of
finding that Hargrave had sufficient control over his profits and losses for this
factor to support independent contractor status. See id.
Also relevant is “whether the putative employer’s control over the
worker’s schedule and pay had the effect of limiting the worker’s
opportunity, as an independent contractor, for profit or loss.” Hobbs, 946
F.3d at 832. Hargrave asserts that “the demands of AIM’s schedule
effectively prevented [him] from finding other [directional drilling] work due
to the number of hours he worked and the ‘on call’ nature of the job
assignments.” But the record does not support that conclusion. Hargrave
was not required to sign a non-disclosure or non-compete agreement, and
2
We acknowledge that there is at least some ambiguity in the record as to whether
Hargrave filed taxes in 2018, the year he worked for AIM, because Hargrave provided
inconsistent answers on that issue in his deposition testimony. However, we would still
conclude that this Silk factor weighs in favor of independent contractor status even if
Hargrave did not, in fact, deduct any business expenses that year.
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was “free to find additional . . . work.” Indeed, AIM encouraged him to do
just that at times. Hargrave chose instead to use the “gap periods where
AIM did not have work for him” to fish and “enjoy life.” That is a far cry
from cases where “as a practical matter the work schedule . . . precluded
significant extra work.” Cromwell v. Driftwood Elec. Contractors, Inc., 348 F.
App’x 57, 61 (5th Cir. 2009) (per curiam).
D.
We also consider “the skill and initiative required in performing the
job.” Hobbs, 946 F.3d at 829. “As a part of this inquiry, whether plaintiffs
have some unique skill set, or some ability to exercise significant initiative
within the business is, for obvious reasons, evaluated.” Parrish, 917 F.3d at
385 (cleaned up). “Greater skill and more demonstrated initiative counsel in
favor of independent contractor status.” Hobbs, 946 F.3d at 834 (cleaned
up).
Hargrave argues he is not “highly skilled” for our purposes because
AIM failed to establish that he was more skilled than AIM’s directional
driller employees. But our court has “decline[d] to require [that] plaintiffs,
as putative ICs, be more skilled than their employee counterparts.” Parrish,
917 F.3d at 386 (“[A] company with a highly-skilled general counsel can still
hire an outside lawyer as an IC, even if the general counsel is a more skilled
lawyer.”) (cleaned up).
After reviewing the record, we agree with the district court that
Hargrave is “highly skilled.” By the time Hargrave began his work with
AIM, he had more than a decade of experience carrying out the
“complicated work” of a directional driller. Id. And by Hargrave’s own
admission, that experience enabled him to develop an “expertise,” which he
used to provide advice on the best way to implement a well plan, and to
propose solutions to problems as they arose. Hargrave’s “high-skill level,
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understood in the light of [his] complicated work, weighs heavily in favor of”
finding he was an independent contractor. Id. See Carrell, 998 F.2d at 333(5th Cir. 1993) (concluding pipe welders’ “specialized skills” supported
independent contractor status).
That still leaves the matter of whether Hargrave had the “ability to
exercise significant initiative within the business.” Parrish, 917 F.3d at 385
(cleaned up). In making this assessment, we generally assess whether the
“major components” of the business that are open to initiative are within the
plaintiff’s control. See Hopkins, 545 F.3d at 345 (quotations omitted). See
also Hickey v. Arkla Indus., Inc., 699 F.2d 748, 752 (5th Cir. 1983) (noting
plaintiff-salesman controlled “major components” of the business, such as
“the methods of marketing and sales” and “the choice of other products to
sell”). AIM asserts that Hargrave “showed initiative in starting and
operating his own consulting firm [prior to working with AIM], investing in
his equipment and tools, and managing his own finances.” But we are not
convinced that the record “demonstrate[s] the sort of initiative compelling
nonemployee status.” See Parrish, 917 F.3d at 386. If anything, it seems
Hargrave’s “initiative was limited once on the job.” Hobbs, 946 F.3d at 834.
That said, this factor “is viewed by the totality of the circumstances.”
Parrish, 917 F.3d at 386. See Hopkins, 545 F.3d at 345 (“Generally, we look
for some unique skill set or some ability to exercise significant initiative within
the business.”) (citations omitted and emphasis added). And ultimately,
Hargrave’s “specialized skill . . . persuades us to hold this factor leans in
favor of [independent contractor] status.” Parrish, 917 F.3d at 386.
E.
We now turn to the final Silk factor: the permanency of the
relationship. See id. Relevant here is whether Hargrave “worked
exclusively” for AIM, “the total length of the relationship,” and “whether
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the work was on a project-by-project basis.” Hobbs, 946 F.3d at 834
(quotations omitted).
The district court found that Hargrave’s relationship with AIM was
“non-exclusive because AIM did not require Hargrave to sign any non-
compete or non-disclosure agreement.” But given that the analysis “is
focused on economic reality” rather than “economic hypotheticals,”
whether Hargrave “could have worked for other directional-drilling
companies . . . is not a relevant concern.” Parrish, 917 F.3d at 387. And it is
undisputed that Hargrave “generally did not contract with other directional-
drilling companies” while working with AIM. Id.
We next consider the total length of the relationship. In our view, the
district court was correct to conclude that “Hargrave’s working relationship
with AIM” was “short-lived.” His work for AIM spanned a six-month
period, notably shorter than the “substantial period[s] of time” that we have
previously found indicative of a more permanent relationship. See, e.g.,
Robicheaux v. Radcliff Material, Inc., 697 F.2d 662, 666 (5th Cir. 1983) (“The
duration of the relationship was from ten months to three years for each
[welder]—a substantial period of time—and except for insignificant work
elsewhere, was exclusive[ ].”). Moreover, as mentioned, there were multiple
“gap periods” within that time where AIM “did not have work for”
Hargrave.
Hargrave’s work was also on a “project-by-project basis,” Carrell,
998 F.2d at 332, which “counsels heavily in favor of [independent
contractor] status,” Parrish, 917 F.3d at 387. Hargrave contends otherwise
because he worked on many AIM projects and did not have to formally re-
apply for each one. But “[t]he key question” is whether AIM hired
Hargrave “for only specific projects” or whether it hired him “to complete
all available [directional drilling] work.” Hobbs, 946 F.3d at 835. Before the
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district court, Hargrave acknowledged that AIM engaged him “to work a
project . . . from the start of drilling until completion,” at which point AIM
would offer him a new project—through RigUp—if one was available. So
while AIM “made an effort to move [Hargrave] to subsequent projects,”
Carrell, 998 F.2d at 332, there is no meaningful dispute that Hargrave’s
“work was on a project-by-project basis,” Hobbs, 946 F.3d at 834 (quotations
omitted).
All things considered, we believe this factor also leans in favor of
finding that Hargrave was an independent contractor.
***
For the foregoing reasons, we agree with the district court that
Hargrave “was an independent contractor” and thus not subject to the
FLSA’s requirements. Accordingly, we affirm.
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