A federal judge in Midland recently ruled in favor of oilfield workers that had sued their company for unpaid overtime. The plaintiff, individually and on behalf of those similarly situated, filed a lawsuit against the defendant for violations of the Fair Labor Standards Act (“FLSA”) alleging that the defendant did not pay overtime for hours worked over forty. Hobbs v. Petroplex Pipe and Construction, Inc., 360 F.Supp.3d 571 (W.D. Tex. 2019). Under the FLSA, employers are required to pay their non-exempt workers time and a half their regular rate for all hours worked over 40 in a given workweek. The plaintiffs said that the defendant violated the FLSA by paying them straight time, and did so willfully or with reckless disregard for the provisions of the FLSA. Id. The defendant said that the plaintiffs were not owed overtime because they were independent contractors. Id. Thus, the defendant argued it was under no obligation to pay the plaintiffs at the rate of one and one-half times the regular rate. Id.
An employee seeking to recover for unpaid overtime compensation must show by a preponderance of the evidence:
- that there existed an employer-employee relationship during the unpaid overtime periods claimed;
- that the employee engaged in activities within the coverage of the FLSA;
- that the employer violated the FLSA’s overtime wage requirements; and
- the amount of overtime compensation due. See, e.g., Harvill v. Westward Commc’ns, L.L.C., 433 F.3d 428, 441 (5th Cir. 2005).
The defendant provides pipe welding, fabrication services as well as roustabout work, treatment of produced oil, dirt work, ditching, pipe installation, and environmental cleanup in the oil and gas industry. The plaintiffs worked for the defendant as a welder performing pipe-welding, structural welding, and other maintenance jobs. The plaintiffs could be called anytime during the day. Id. Whether a worker is an employee depends on “whether, as a matter of economic reality, the worker is economically dependent upon the alleged employer or is instead in business for himself.” Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008).
The Court concluded that the defendant exercised necessary control over the plaintiffs to lean more towards employee status. The Court’s analysis can be summarized as follows:
- Relative Investment. The Court found that Plaintiffs invested a relatively insubstantial amount in their trucks and welding equipment, which weighed in favor of employee status.
- Skill & Initiative. The Court found that pipe-welding, such as that performed by the Plaintiffs in this case, requires specialized skills. However, Plaintiffs’ initiative was limited to decisions regarding their welding equipment and the detail of their welding work while they were working for Defendant, and thus the Court found that the skill and initiative factor is neutral.
- Permanency of Relationship. Relevant to the permanency of the parties’ relationship is “whether any plaintiff `worked exclusively’ for [Defendant],” “the total length of the relationship” between the parties, and “whether the work was on a `project-by-project basis.'” The Court found that Plaintiffs were not hired on a project-by-project basis. Instead, Defendant hired Plaintiffs to meet all of Defendant’s welding needs under its contracts with customers and used Plaintiffs to complete emergency maintenance jobs and other welding tasks at Defendant’s shop during an industry downturn. Further, the Court found that Plaintiffs worked on a steady and reliable basis over a substantial period of time, which varied between four months, six months, nine months, and three years. Accordingly, the permanency of the relationship factor, when viewed in light of the economic reality of the parties’ relationship, weighed in favor of employee status.
- Other factors. The Court also found significant that the Plaintiffs’ relationship with Defendant in this case, was not on a project-by-project basis. Instead, Defendant employed Plaintiffs to complete all of its pipe welding projects and assigned Plaintiffs to their next welding project upon completion. Moreover, Plaintiffs worked for a substantial amount of time and exclusively for Defendant during the relevant period. Plaintiffs were also removed from pipe welding projects to complete emergency maintenance work in other locations. The Court also noted that the fact that some Plaintiffs may have been classified as independent contractors by other companies before or after being employed by Defendant “does not preclude a finding that they exchanged this status” for one that was more secure with Defendant. Similarly, just because Plaintiffs “listed themselves as self-employed on their tax returns… does not tip the balance in favor of independent contractor status,” especially “where, as here, the economic realities of the situation indicate that [Plaintiffs] depended upon [Defendant] for [their] livelihood.”
Based on the foregoing analysis the Court found that Plaintiffs were employees as defined by the FLSA.
A cause of action under the FLSA shall be barred unless commenced within two years after the case of action accrued, except that a cause of action out of a willful violation may be commenced within three years after the cause of action accrued. 29 U.S.C. § 255(a). A willful violation is established by showing that “the employer either knew or showed reckless disregard as to whether its conduct was prohibited by the [FLSA].” McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133, 108 S.Ct. 1677, 100 L.Ed.2d 115 (1988)). However, the Court failed to find that the defendant willfully violated the FLSA. The plaintiffs failed to show that any complaints were made with regard to the defendant’s pay structure and that the defendant ignored such complaints. Therefore, the two year statute of limitations applied.
The Court awarded the workers $50,800 in unpaid wages and $50,800 in liquidated damages, as well as reasonable attorney fees and costs. The Court, in a subsequent opinion, awarded more than $120,000 in attorney’s fees and expenses to the Plaintiffs.
Independent contractor misclassification is a major problem in the oilfield industry in Texas, New Mexico and across the U.S. If you an oilfield worker who has been denied overtime pay, or if you have worked in the oilfields and been designated an independent contractor and paid straight time or a day rate, consider speaking with an experienced attorney today to learn your rights. Josh Borsellino is a FLSA attorney that understands the rules and regulations under the FLSA. He works on a contingency fee basis meaning that he does not get paid unless you get paid so there is no upfront cost. He can be reached at 817.908.9861 or 432.242.7118.