Public Justice provides an excellent overview and commentary on a recent court opinion that struck down a scheme where the employer misclassifies employees as independent contractors and then requires the workers to give up their right to file a lawsuit in court by signing an arbitration agreement. Here are excerpts:
It’s a clever scheme: Pretend your workers are independent contractors rather than employees, so you can skirt labor laws and avoid pesky requirements like, say, the minimum wage. And then protect yourself from liability—after all, misclassifying employees as independent contractors is illegal—by requiring anyone who works for you to sign an arbitration contract, giving up their right to sue you in court.
At many companies, this scheme has become standard practice. And it’s particularly common in the trucking industry—an industry that employs millions.
But trucking companies shouldn’t be able to use this scheme. The Federal Arbitration Act—the law the companies depend on to enforce the arbitration contracts they force their workers to sign—explicitly exempts the “contracts of employment” of transportation workers. That’s no problem, the trucking companies have been arguing. Our drivers, they say, are independent contractors, not employees, and therefore their contracts can’t possibly be “contracts of employment.” And, for a while, some trial courts bought it.
But now the jig is up. The first appellate court to decide the issue has now made clear that transportation companies cannot force their workers to arbitrate when they would not otherwise have to, simply by (mis)classifying them as independent contractors. As the court explained, when the Federal Arbitration Act was passed in 1925, the term “contracts of employment” was universally understood to apply to all agreements to do work—regardless of whether the worker was an employee or an independent contractor. And Congress used that broad term with good reason: The Federal Arbitration Act was passed at a time of tremendous strife within the transportation industry—disputes between transportation workers and their employers had repeatedly disrupted interstate commerce and, sometimes, even resulted in violence. Congress exempted transportation workers from the Arbitration Act to ensure a public resolution of—and public authority over—these disputes that threatened the economic security—and, in some cases, the physical safety—of the nation.
This decision is a huge win for transportation workers—and for the fight against forced arbitration. For the millions who work in the transportation industry, the opinion puts the lie to the argument that transportation workers can be forced into arbitration simply because they are—or, worse, because their employer falsely claims they are—independent contractors. And for anyone fighting forced arbitration, the decision makes clear that whether the Federal Arbitration Act applies in the first place is always a question for the court—not an arbitrator—to decide.
With the large amount of new projects taking place, a new boom is occurring in the petrochemical business along the Gulf Coast (particularly in Texas and Louisiana), and this means increased competition for the workers needed to build and operate plants. A number of large companies including Exxon, Saudi Basic Industries, Chevron Phillips Chemical, Dow Chemical, ME Global, Total have announced or are underway with major new projects. In general, this is good news for those seeking construction and refinery jobs, including:
- CAD / Drafting
- Schedulers / Planner
- Field Engineer
- Service Technician / Operator
- Equipment Operator
For a number of years, petrochemical related companies have been expressing concerns that there are too few skilled workers entering the industry to make up for the number of workers who are rapidly approaching retirement age. This has led employers to focus more heavily on recruiting already trained and experienced workers from competitors – placing a premium on such job seekers.
There are, however, a few things that workers should be aware of to insure they receive proper compensation – particularly for the many hours of overtime they are likely to be required to work.
While wages for skilled construction workers on/at petrochemical plants can be $30, $40 or more an hour, not all receive full and proper pay in accordance with the labor laws for their overtime work. We have represented many of these workers, and for these high-paying jobs, the value of unpaid overtime can add up to tens of thousands of dollars in a relatively short period of time.
Straight Time for Overtime
With very few exceptions, workers who are paid on an hourly basis are legally entitled to receive time and a half their regular hourly rate for all hours they work in excess of 40 per week. Even if the hourly rate is high ($40, $50, $75+) the overtime laws likely still apply. Hours cannot be shifted or averaged across more than one workweek in an attempt to avoid the payment of overtime. Additionally, it does not change the law when a worker is provided through a staffing or placement agency. Bottom line – if you are being paid the same hourly rate for all hours worked, including those over forty per week, you should be very skeptical.
Day Rate with No Overtime Pay
Construction and petrochemical workers may be paid using a day-rate system, but this does not mean that they are not legally entitled to an overtime premium once they exceed 40 hours per week. To the contrary, most industrial workers paid a flat daily-rate for all hours worked during each day must be paid time and a half for all overtime worked. How to calculate the correct overtime rate for a day rate employee can be a bit tricky, but this just goes with the territory for employers who elect to use this pay method.
Misclassification as an Independent Contractor
The practice of labeling employees as independent contractors is particularly widespread in temporary employment industries such as construction services. Because it has been going on so long, many workers wrongly assume it must be legal. Treating workers as independent contractors is not a minor clerical error, but rather a conscious decision made by an employer trying to save money by not paying the taxes, benefits and overtime wages they should. In a competitive bidding situation, this puts honest companies who properly classify their workers at a distinct disadvantage and gives an unfair pricing advantage to the violators.
The analysis involved in determining if a worker is really an independent contractor is fact specific, but in general a person is considered an employee if he or she is subject to another’s right to control the manner and means of performing the work. True independent contractors, on the other hand, are individuals who obtain customers on their own to provide services (and who may have other employees working for them) and who are not subject to control over the manner by which they perform services.
For more details, please see – How to Tell if You Are Really an Independent Contractor
Here are a few examples of the projects along the Gulf Coast:
- Exxon: $10 billion petrochemical complex near Corpus Christi expected to create 11,000 construction jobs and 600 new permanent jobs at the site.
- Sasol: $8.1 billion Lake Charles ethane cracker and derivatives project will create more than 500 full-time manufacturing jobs and more than 5,000 construction jobs at peak
- Total:$1.7 billion ethane steam cracker in Port Arthur will support 1,500 jobs at the peak of the engineering and construction period.
- Freeport LNG: $3 billion Natural Gas Liquefaction with 1,000 construction workers at peak.
- Dow Chemical / MEGlobal: $1 billion Ethylene Glycol Plant with 1,400 construction workers at peak.
- Marathon Petroleum / Fluor: Major reconfiguration of Galveston Bay and Texas City refineries. Marathon plans to spend about $85 million on the project in 2017.
- G2X Energy: $1.6 billion Big Lake Fuels Methanol Plant in Lake Charles, La. Expected to add 2,500 direct and indirect jobs to the Lake Charles area.
- Lotte Chemical and Axiall Corp.: $1.9 billion ethane cracker complex in Calcasieu Parish. Estimated 2,000 construction jobs will be created at peak building activity
Petrochemical and construction workers should not rely on their supervisor or Human Resources for critical information regarding the laws on overtime pay and how such apply to their specific job.
Because of the strict time limits imposed by the overtime pay laws, procrastination can be costly. If you have any doubts as to your entitlement to overtime, contact the overtime pay experts at The Lore Law Firm for a free and confidential review.
Call 1-866-559-0400, email email@example.com or submit your information using our convenient Case Evaluation form for a FREE and CONFIDENTIAL review of your circumstances – because time is money.
On November 22, 2016, a federal judge in Texas blocked the changes to the salaried Executive, Administrative, and Professional exemptions that were set to take effect on December 1, 2016. The injunction was part of a case brought by 21 states who said the rule was unlawful and would substantially hurt small businesses. The judge agreed and blocked the rule from taking effect, leaving many affected employees and employers wondering what would happen next.
Despite this action by this one judge, you may still be legally entitled to the benefits under the new rules. If you have been paid a salary of less than $913 per week or $47,500 per year since December 1, 2016 and are not being paid overtime because you are classified as “exempt”, you should contact us to discuss your situation – it’s free and confidential.
What Did the Rule Changes Consist Of?
The big changes would increase the wage threshold for “white collar” employees to qualify as salaried exempt. The minimum salary was increased to $913 per week or $47,476 per year. The highly compensated employee (HCE) exemption was raised to $134,004 per year. In addition to that, employers would have been able to use salary bonuses for up to ten percent of the salary threshold, but there would have been no changes in the general duties test.
The changes would have had a major impact on a significant portion of the country’s working population. Almost 11 million workers who previously received a salary and no overtime pay would become eligible for overtime under the new overtime pay laws.
What Is Currently Happening with the Rule Changes?
On December 1st, the Department of Labor (DOL) filed an appeal saying that it was the role of the DOL to issue rules on the salary level test, the salary basis test, and the general duties test. However, a new administration took office in January, creating murkiness on what would happen next. The Trump administration asked for more time, citing that it didn’t even have a Labor Secretary sworn in yet.
On February 22nd, 2017, the Appeals Court extended the deadline, giving the Trump administration more time to decide if it will support the new overtime rules. It now has until May 1st to file its brief and continue the appeal. The DOL hopes to have Alex Acosta confirmed and sworn in well before then.
Although there is a strong likelihood that a Trump-controlled DOL will not devote resources to defending the Obama DOL’s new rules, it might seek to change the rule altogether, significantly lowering the salary threshold to about $35,000 per year.
Keep in mind that the blocked rule changes have significant public support and have been endorsed by labor groups including the AFL-CIO. Therefore, it would premature to consider them dead. Although Trump said he did not agree with the rule changes on the campaign, he did promise to support and improve wages for American workers, so it is hard to tell which way he will go now that he is President. We really don’t know what the future will hold.
However, that doesn’t mean workers still don’t have rights. If you believe your employer is not following the overtime rules currently in place and you are owed compensation, please contact our overtime lawyers today at (713) 782-LAW1 (5291) for a free consultation.
Many companies employ assistant managers with an “exempt” job classification in order to staff additional employees without paying overtime wages. With companies under constant pressure to find cost savings, and in a job market still rebounding in many sectors, the practice remains rampant–and takes away wages that many of these employees are entitled under federal law to earn. Misclassified assistant managers have a right to recover the unpaid overtime wages they should have received (potentially double) and should seek the counsel of overtime lawyers.
Who Is Legally Exempt
The Department of Labor defines who is exempt in an executive or administrative position based on a combination of the salary and the duties performed. If an assistant manager is paid at least $455 per week in salary, he or she can be classified as exempt as long as the duties performed fall within the definition of management, including all of the following:
- supervision of two or more full-time equivalent employees;
- primary duty of managing all or part of the enterprise; and
- either authority to hire or fire employees, or meaningful input into the decision to hire or fire employees.
- primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
- primary duty includes the exercise of discretion and independent judgment with respect to important business decisions.
If these duties tests are not met, the employee should not be classified as exempt. Further, the “primary duty” requirement means that is the most important part of the employee’s job, but not necessarily what takes most of their time. The Department of Labor recognizes that this is a question whose answer depends on the facts of a given employment situation. Management, though, is defined based on duties of supervision, organization, budgeting, scheduling, and other aspects of running a department or organization, rather than performing day-to-day work there.
How Assistant Managers Fit In
When companies hire assistant managers, they use the title to refer to many different kinds of work. Some of these certainly do qualify as “management” under the Department of Labor standards, but others fall far short. Companies often define these positions internally as exempt because they can achieve significant cost savings. A single assistant manager can work 50 or 60 hours per week, allowing the company to avoid hiring one or two part-time employees. It saves onboarding and training costs, supported on the back of one person who is paid a set salary (currently as little as $455 per week) and no overtime pay for that work.
For the company, this practice risks litigation, but the risk is frequently worth the significant cost savings. Companies often assign some managerial tasks to assistant managers and even describe the duties in company literature as managerial. The question is whether this applies in practice. If you are spending most of your time doing the same work as your non-exempt staff, without actual authority over other employees or over company scheduling or operations, you may not be properly classified as exempt (ie. misclassified as exempt)– and entitled to recover back pay.
If you’re not careful, you could spend years working for less pay than you’re legally entitled to. When employees realize that pay practices may be wrong, the only way it changes is if they step up and do something. Do your homework and find out how your employer is classifying you. Keep track of the hours you work, and if you don’t meet all of the qualifications for exemption, speak up, and seek legal help if your employer won’t agree to fully compensate you.
If you are currently, or have been within the past few years, in an assistant manager position, paid a salary, and worked over 40 hours per week, you may have been misclassified and, as a result, entitled to compensation for unpaid overtime wages. Contact our firm immediately for a free and confidential case review and consultation from our overtime lawyers. Please use the form on the right side of this page or call us toll-free 24 hours a day at (866) 559-0400.