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Consultants and Overtime: What You Should Know

An increasing trend in Texas and across the country over the past 5 years has been the use of “consultants” rather than employees by large companies.  This happens often in the oil and gas industry.  For example, a large oil and gas production company will often use consulting firms to outsource their mud engineers, directional drillers, completion staff, Health, Safety and Environment (HSE) staff, drilling supervisors, and other personnel that are vital to their drilling operations. Typically these individuals are classified as independent contractors rather than employees and paid a day rate or straight time.  Companies classify workers as independent contractors for a wide variety of reasons, including to avoid paying benefits, health insurance, overhead, taxes, and overtime.  Often I receive calls from people who were hired as consultants and want to know whether they are owed overtime.  This article provides a brief overview of the issues raised by consultants who do not receive overtime pay.

ARE CONSULTANTS DUE OVERTIME PAY IN TEXAS?

Federal overtime laws do not cover true independent contractors, so the issue often turns on whether the worker was truly an independent contractor  or instead was an employee.  But just because a worker is classified as an i.c. does not mean that he or she truly was one.  Courts use a multi-factor test to make this determination.    

WHAT IS AN INDEPENDENT CONTRACTOR IN TEXAS?

The independent contractor vs. employee issue can seem confusing, but it is usually clear based on the economic realities of the relationship between the worker and the company as to whether the worker is truly an  employee or not.  Federal courts in Texas use five non-exhaustive factors (which we can call the Texas independent contractor test) to guide this assessment:

  1. the degree of control exercised by the alleged employer;
  2. the extent of the relative investments of the worker and the alleged employer;
  3. the 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.” Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008). 

“[E]ach factor is a tool used to gauge the economic dependence of the alleged employee,” and “no single factor is determinative.” Id.  While this test may seem conviluted, the key issue is control – if the worker is told where to go, what to do, when to do it and how much he will be paid to do it, he is almost certainly going to be found to be an employee rather than an independent contractor.  Put another way, workers that have little control over their schedule or pay and who do not freelance for other companies are almost always found to be employees rather than independent contractors. 

CAN CONSULTANTS SUE FOR OVERTIME PAY?

The short answer here is yes.  Unpaid overtime lawsuits by consultants are allowed in Texas.  Josh Borsellino regularly handles such cases, and has recovered unpaid overtime for hundreds of workers that were misclassified as independent contractors.  If you are or were classified as a consultant or an independent contractor (i.e. you were paid through a 1099) and were denied overtime pay, call Josh now for a free evaluation of your claim.  Josh handles cases on a contingency fee basis, meaning he not paid unless you recover money.  Josh can be reached at 817.908.9861 or 432.242.7118 or complete this online form for a free consultation.

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