Ryan T. Hand
Lorance & Thompson, P.C.
2900 N. Loop West Ste. 500
Houston, TX 77092
713.868.5560
rth@lorancethompson.com
Agencies to watch
US Department of Labor (Fair Labor
Standards Act minimum wage and
overtime pay)
 US Internal Revenue Service (Federal
Payroll Taxes)
 State Agencies (unemployment,
revenue, worker’s compensation)
 Agencies with sharing agreements
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US Department of Labor
Secretary of Labor, Thomas E. Perez,
Nominated by President Obama, July
23, 2013
 Closely monitoring the Oil & Gas
industry; DOL has launched a multi-year
enforcement initiative on classification
issues
 DOL has hired more investigators
 Holding outreach forums to educate
workers
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Fair Labor Standards Act (“FLSA”)
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Covered employees must be paid at
least the federal minimum wage of $7.25
for all hours worked, plus time and onehalf their regular rates, including
commissions, bonuses and incentive
pay, for hours worked beyond 40 per
week. Additionally, employers must
maintain accurate time and payroll
records.
Recent settlements
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2013: Building Maintenance provider in Houston charged to pay more than $273,000
in minimum wage and overtime back wages to 266 janitors following DOL investigation
2013: Mud logging co. agreed to pay $596,000 in back wages to 121 current and
former employees for overtime, minimum wage and record keeping, improperly
classified as exempt employees.
2013: Houston oil and gas equipment manufacturer in Houston assessed with more
than $687,000 in overtime back wages for roughnecks and crane operators improperly
classified as independent contractors
2013: Oklahoma oil field service co. agreed to pay $51,839 in overtime back wages to
28 current and former employees following a DOL investigation that found violations of
the overtime and record-keeping provisions. The company misclassified its employees
as independent contractors.
2013: General Contractor providing maintenance employees at drilling sites pays more
than $176,000 in back wages following DOL investigation, misclassified as contractors
and paid straight wages with no overtime.
2012: Ground water sampling co. agreed to pay $187,000 in back wages to 69
employees improperly classified as exempt from overtime pay.
In fiscal year 2012, the Southwest division concluded seven cases where employers
were accused of retaliating against workers. By fiscal year 2013, that number jumped
to 40 retaliation investigations concluded across the Southewest region.
In 2011, DOL collected more than $5 million in back wages for minimum wage and
overtime violations under FLSA that resulted from employees being misclassified as
independent contractors or otherwise not treated as employees.
FLSA: Independent Contractor or
Employee
Independent Contractors are not subject to the FLSA
Focus: whether economically dependent on the alleged
employer or truly in business for him/herself.
 Depends on the circumstances, and looks beyond the
contract
 Five non-exhaustive factors:
(1) degree of control exercised by the alleged
employer;
(2) extent of the relative investments of the worker
and the alleged employer;
(3) 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.
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Exempt employees
Most Common Exemptions from the
FLSA's requirements for the payment of
overtime:
 Workers employed in bona fide
executive, administrative, or
professional capacities
 Never determined solely by looking at a
job title or classification given to a
worker. Depends on the nature and
extent of the activities of the worker.
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Primary Duty Test
"primary duty" consists of the "management of the enterprise" in
which she is employed "or a customarily recognized subdivision
thereof."
 the executive employee's work must include "the customary and
regular direction of the work" of two or more employees.
 The regulations define an exempt administrative employee as
one whose "primary duty" consists of:
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1) office or non-manual work directly related to
management policies or general business operations
2) work requiring the exercise of discretion and
independent judgment
3) work directly related to management or general
business operations, not merely clerical or secretarial
tasks or tasks that are routine or repetitive without
judgment.
Retaliation
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Employers should train managers on
FLSA requirements:
1) document proof of such training;
2) provide neutral job references for
past employees or contractors;
3) conspicuously post a fact sheet
outlining the prohibition of retaliation
against employees who exercise
rights under the act.
Motor Carrier Exemption
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The FLSA exempts "any employee with respect to
whom the Secretary of Transportation has power to
establish qualifications and maximum hours of
service pursuant to the provisions of" the Motor
Carrier Act of 1935, (“MCA”)
Alleged employee must be "engaged in activities of a
character directly affecting the safety of operations of
motor vehicles in the interstate transportation of
passengers and property." 29 C.F.R. § 782.2.
Exemption does not apply to drivers operating motor
vehicles that weigh 10,000 pounds or less
Activities Affecting the Safety of Motor
Vehicles in Interstate Commerce
A "driver" is an occupation that directly
affects the safety of motor vehicles. See
29 C.F.R. § 782.2(b)(1).
 Whether transportation between two
points in a single state is interstate or
intrastate depends on the shipment's
“essential character.”
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Interstate Commerce
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Transporting cargo solely within a single state is
subject to the Secretary of Transportation's
jurisdiction where the transportation is part of a
"practical continuity of movement" across state lines.
If a stoppage in the movement represents "a
convenient intermediate step in the process of
getting goods to their final destinations, the goods
remain 'in commerce' until they reach those points
Commodities moved in pipelines and/or by other
means in interstate transport, but moved by truck
solely intrastate can be interstate commerce.
DOL Advisory Opinion Nov. 2009
Dispatchers, office personnel, those that
unload vehicle and those who load but
are not responsible for the proper
loading are generally not employees
engaged in “safety affecting activities.”
 Drivers, driver helpers, loaders
responsible for proper loading and
mechanics can be exempt.
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Songer et al. v. Dillon, Sunset
Logistics, U.S. 5th Circuit 2010
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Drivers transported construction materials within in
Texas, and occasionally hauled aggregate across
state lines.
Drivers claimed they were due unpaid overtime.
The employees must be employed by carriers that
are subject to the U.S. Secretary of
Transportation’s jurisdiction, i.e., engaged in
interstate commerce.
If drivers can “reasonably be expected” to perform
interstate transport, the MCA exemption applies.
Even if the driver has never handled an interstate
load, if he/she could be asked to drive interstate,
then the MCA exemption applies.
DOL targets TX tanker co., crude
oil hauler, suit pending
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DOL investigator determines that nearly 100
owner/operators under lease to a tank carrier
are employees, not independent contractors.
Found dispatchers are non-exempt, although
they were salaried employees.
Prepared to award back wages and agreed
the drivers were exempt, but found record
keeping violations on the driver’s work.
TX Tanker filed declaration action.
DOL filed motion to dismiss on ripeness and
lack of exhausting administrative efforts,
pending.
Roop v. Wrecker & Storage of Brevard
Inc., 2013, U.S. Dist. Court, M.D.
Florida
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Dispatcher sued trucking company for overtime
pay, claiming he is non-exempt.
Court noted that dispatchers generally do not
perform work that affects the safety of motor
vehicle operation, so the MCA exemption may not
apply.
However, because the dispatcher performed more
than just typical dispatcher duties, summary
judgment was not proper.
Court found the same on the executive employee
defense. Fact issues prevented summary
judgment.
Exempt dispatchers
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. HARRISON v. PRESTON, Dist. of MD, 1962
Dispatchers regularly exercise discretion and
independent judgment, and are exempt under the bona fide
administrative exception of the FLSA. The trucking company
provided considerable evidence of the employees job duties.
 Perine v. ABF, C.D. of Cali., 2006
Dispatcher determined to be exempt under the
administrative exception under Cali. law, similar to the FLSA.
Dispatcher’s duties were “bound up with his supervisory
responsibilities. Every time a customer called for a pickup,
Plaintiff's subsequent action had to reflect the company's policy
of minimizing overtime pay and ensuring that driver would not
be on the road beyond the ceiling imposed by the Department of
Transportation
Texas Labor Code: Worker’s
Compensation
Texas Worker’s Compensation:
 Tex. Lab. Code § 406
 Motor carriers not required to provide
worker’s compensation for independent
contractors.
 If an owner/operator assumes the
responsibilities of an employer over
his/her drivers, then the motor carrier is
not an employer for worker’s
compensation purposes.
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Texas Labor Code: Liable Employer
for Unemployment Taxes
Texas Unemployment Compensation Act
(TUCA)
 A worker is an employee if the recipient
of those services has direction and
control of the worker; such as, when,
where and how the work is done or
provides the equipment necessary for
the job
 20 part test.
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Texas hits FedEx with
Unemployment Taxes for contract
FedEx drivers, nearly $1 Million
FedEx Ground classified drivers as
independent contractors (“IC”)
 FedEx accuses Texas of double dipping
in seeking taxes from FedEx and the ICs
 Very fact intensive analysis
 Texas has moved to dismiss based on
immunity
 The issue is amount of FedEx control
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FedEx argument
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Contractors have significant independent
discretion and business judgment in
performing their job.
FedEx imposes no set work hours, routine
or schedule for the contractors
Contractors own their own trucks
FedEx does not assist with financing
Drivers can deliver for other companies
The contractors have their own companies
FedEx has challenged other states and has
prevailed.
Practical Take-Aways
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Carefully draft owner/operator agreements,
contractor language, taxes, hiring/firing,
indemnification, maintenance, ownership of
equipment;
Carefully review operations;
Dispute unemployment claims;
Have job descriptions with broad and specific job
duties and job titles, “City Dispatch Supervisor”
Document hours worked;
If it’s a small amount, consider paying overtime for
debatable positions;
Perform due diligence with contractors, do they
have insurance, own equipment, pay taxes for
unemployment, etc.