Texas Lawyer has signed up Alan Bush and Lee Winkelman as freelance contributors. Their latest article, "Learn From the DOL’s Audits in the Oil Patch," appeared in Out of Order section on June 9, 2014.
The Department of Labor has officially hit the oil patch. And they're hunting for overtime violations.
In a December 2012 press release, the DOL declared that it is launching an "enforcement initiative" on Marcellus Shale contractors that will last for several years. The DOL touted a six-figure back wages award against one environmental service company and promised more to come:
The investigations were conducted under a multiyear enforcement initiative focused on vendors who perform various phases of the oil and gas fracking process on the Marcellus Shale formation located beneath the commonwealth of Pennsylvania and the state of West Virginia.
Similarly, the division is conducting outreach to workers and community groups to inform them of the initiative and departmental services, and to encourage vulnerable workers to come forward with potential violations.
Are other oil and gas plays under the DOL's radar? Maybe not. The DOL's new Secretary has set his sights on the entire oil and gas industry for safety violations. He said so in an August 2013 press release.
Plaintiff's lawyers have followed suit. Google "overtime lawsuit in the oil patch" and see what you find.
The DOL and plaintiff's lawyers are taking a hard look at:
- Independent contractors who should actually be treated as employees;
- Day rate pay structures that don't meet the detailed DOL regulations;
- Salaried exempt employees who are actually non-exempt and should get overtime pay; and
- Forgetting to pay overtime wages to non-exempt employees on non-discretionary bonuses.
Those are all common overtime violations in the oil patch. That's why I'm talking for HR Southwest on Overtime Lessons from the Oil Patch.
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionals, CPA’s and lawyers. You can hear Alan at:
Houston CPA Society | Spring Accounting Expo
Independent Contractors: More Than You Bargained For
May 21, 2012
Using independent contractors has its advantages. But if you call the wrong worker an independent contractor, you’re in for it. The IRS, DOL and plaintiff’s lawyers will all want a piece of you. Worse still, you could be on the hook with personal liability. So who’s really an independent contractor? How do you fix a classification mistake? We’ll talk it out.
Where: Reliant Center
What are the chances you have an overtime violation that's under your radar? In 73% of its recent wage and hour investigations, the DOL found violations. That's what the DOL's new enforcement data website says.
And the federal overtime law, the FLSA, puts your personal skin in the game. Depending on the circumstances, an overtime claimant can impose individual liability on managers, officers and even directors.
In Goetz v. Synthesys Technologies, Inc., a federal court in Austin put a director on trial for the overtime pay sins of his company. The court refused to let the director skate on summary judgment. Pointing to the director's heavy involvement in a round of layoffs and participation in an employee training seminar, the court tossed the director's personal liability to an Austin jury.
Don't count on your insurance company to pick up the tab. Many EPLI policies won't cover overtime claims—they're specifically excluded. Insurance companies know that overtime compliance is a risky business.
Protect yourself by spotting and resolving overtime risks before they become collective action lawsuits. Just a few common ground zero risks:
- Independent contractors who should really be employees receiving overtime pay
- Salaried exempt employees whose job duties do not match the overtime exemptions
- Salaried exempt employees whose pay is docked against overtime rules
- Automatic deductions from the time clock for lunch and other breaks
- Failing to pay non-exempt employees for their time:
- Working from home on a smart phone
- Booting up a computer before a shift
The IRS has announced a voluntary self-reporting program for eligible employers who are concerned that their independent contractors should actually be classified as employees. If you cop to misclassifying independent contractors, you get IRS amnesty on a bunch of back taxes and penalties. In exchange, you must promise to start treating the workers as employees going forward. That means you pay state and federal payroll withholding taxes.
Doesn't sound half bad. Any hidden risks to copping out?
Absolutely. The IRS may forgive your past sins, but not the DOL. Don't forget that misclassifying workers as independent contractors triggers liability for overtime pay. Nothing in the IRS's amnesty plan keeps the DOL from prosecuting you separately for unpaid overtime and penalties.
In fact, the IRS and DOL recently renewed their vows to share information on workers misclassified as independent contractors. So, if you self-report, it sure looks like the IRS will rat you out to the DOL.
Nice job. Think twice before jumping into this one.
Three state and federal agencies want a piece of you. That is, the IRS, TWC and DOL see big dollar signs if you call the wrong worker an independent contractor. The IRS and TWC want payroll taxes, and the DOL wants overtime pay. What a trifecta?
Tack on plaintiff's overtime lawyers—now you've got a party. After all, the DOL is referring overtime claimants to the American Bar Association.
The Chronicle just reported on independent contractors.
In the government's eyes, you're guilty until proven innocent. You have the burden to prove that each worker is really an independent contractor. If you can't, the law presumes that the worker is your employee. Roughly 80% of independent contractors, says the IRS, are truly employees.
The feds have found strength in numbers. Launching a joint "Misclassification Initiative," the IRS and DOL are now sharing leads on your independent contractors.
And the DOL is working towards a "Right-to-Know" rule. The proposed rule would have companies tell independent contractors why they are classified as contractors, not as employees. That'll make any intelligent worker a little suspicious.
Even today, your independent contractors are a risk. They can easily figure out that claiming they're really employees might score them some quick cash. Here's how:
- Contractor gets laid off and goes to the TWC to file for unemployment benefits, then the TWC directs the contractor to visit the DOL for overtime pay; or
- Contractor gets irritated at you, Googles "independent contractor," and sees that the first hit is an ad for a plaintiff's overtime lawyer.
Do you use independent contractors? Take a good, hard look at them. Make sure they meet the different criteria established by the IRS, DOL and TWC to be called independent contractors. By doing nothing, you make it easier for the government or a plaintiff's lawyer to collect extra tax and overtime penalties.