Since 2012, the United States Department of Labor (DOL) reports that it has recovered over $40 million in back wages for employees in the oil and gas industry. Employers in the industry can expect claims to rise as the DOL continues its enforcement initiatives. The leading cause of back pay awards? Worker misclassification. The DOL’s nearly 1,100 investigations into the oil and gas industry’s workforce classifications have focused primarily on two areas; independent contractors and white-collar exemptions.
Misclassifying Employees as Independent Contractors
Many employers in the energy sector commonly pay certain types of workers on a per diem or flat rate basis, irrespective of the number of hours that they work. Oftentimes, these workers are classified as independent contractors and many even enter into independent contractor agreements with their employers. As many companies in the oil and gas industry have learned the hard way, these factors alone are not enough to establish the existence of an independent contractor relationship. Instead, there are a number of criteria that must be met in order for a worker to be properly classified as an independent contractor (and lawfully exempt from minimum wage and overtime provisions of the Fair Labor Standards Act). Employees in the energy sector who are misclassified as independent contractors are often entitled to considerable back pay due to the considerable amount of overtime that they work.
Misclassifying Employees as Exempt Based on Job Title
The DOL’s investigations of oil and gas employers also commonly uncovers employees who are misclassified as exempt from minimum wage and overtime requirements under the Fair Labor Standard Act’s white collar exemptions. These employees are frequently and improperly considered by their employers to qualify for the executive, administrative, or professional exemptions in particular. Employers operate under the inaccurate assumption that these exemptions apply based upon the employees’ job titles which regularly include one or more of the following “buzzwords”: manager, foreman, engineer, technician, and specialist. As the DOL has made clear, however, job titles are not determinative of exempt status. Instead, employees’ salary levels and job duties are the true measure of whether they are eligible for these exemptions.
Employers in the oil and gas industry (and in general) are well-advised to ensure proper classification of workers who they consider as independent contractors or as exempt from minimum wage and overtime under a white collar exemption. In the meantime, the DOL can be expected to continue pursuing its misclassification enforcement initiative.