Per Diem Payments Used to Cheat Workers out of Millions in Overtime Pay

As previously discussed in a prior post relating to shipyard workers employed by a Louisiana based staffing company, pay schemes in which workers are given per diem payments that make up a significant amount of their total pay should be looked at closely to determine if they are legal.  In many instances, they are illegal attempts to mislabel wages as per diem payments in order to avoid paying workers the full amount of overtime wages due.  For example: if workers are paid $10 per hour plus a “per diem” of $9 per hour, but their overtime pay rate is calculated using only the $10 per hour base rate, this is almost always an improper attempt to reduce overtime payments.  Overtime should be calculated based on an hourly rate of $19 per hour, not $10.

This type of pay scheme has been used by a number of major industrial services employment agencies along the Gulf Coast (Louisiana, Mississippi, Florida, Alabama & Texas) for years and appears to be common among workers at shipyards and oilfield fabrication facilities.  The types of workers impacted include: shipfitters, shipwrights, welders and others who work with their hands cutting, grinding, welding, bending and assembling components.  Department of Labor investigations have recently uncovered this practice at two such labor services companies – Hutco, Inc. and Savard Marine Services.

Employees who work through staffing companies should know that even though their assignments may be considered contract, temporary or temp jobs:

  • Federal and state overtime pay laws still apply
  • An “agreement” cannot change the law.  Agreeing to work with no overtime pay or reduced overtime pay does not give up the legal right to full/proper overtime pay.
  • Per diem payments are only proper to reimburse them for work related expenses they actually incur on the employer’s behalf such as travel (not commuting to/from work) and lodging when away from home
  • Per diem payments that do not serve to reimburse workers for legitimate work-related expenses should be included when calculating overtime pay rates

Those who are employed through temporary / staffing companies should be informed and very skeptical of any pay practices that appear to deprive them of overtime wages – including being paid straight time for overtime and being paid a day-rate with no additional pay for hours over 40 per week.  These companies are constantly looking for ways to reduce labor costs and gain a cost advantage over their competition.  When these cost cutting attempts violate state and federal labor laws on overtime, they gain an unfair advantage over other companies who do pay workers in accordance with the law.  The millions of dollars they save in overtime pay are dollars that rightfully belong in the pockets of their hard working employees.

If in doubt, ask questions and seek advice from reliable resources outside of the company.

Other overtime pay violations can occur when companies:

  • Fail to combine hours worked in more than one department or location when determining the total number of hours worked.
  • Fail to include in calculating overtime the time spent working through meal breaks or while attending safety meetings or training sessions
  • Alter time records and/or pressure workers to work “off the clock” and not record overtime
  • Fail to include shift differential or bonuses in calculating an employee’s overtime rate.

Call 1-866-559-0400, email mlore@overtime-flsa.com or submit your information using our convenient Case Evaluation form for a FREE and CONFIDENTIAL review of your circumstances – because time is money.

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