San Antonio Employment Law Blog : San Antonio Employment Lawyer & Attorney : Thomas Crane Law Firm : South Texas, Bexar County TX Wage & Discrimination Issues

A frequent question arises regarding when an employee is an independent contractor and when is he just a regular employee.  Many employers have moved to using independent contractors instead of employees.  The status of independent contractor can save the employer significant amounts of money in employment taxes, social security payments, etc.

But, the IRS understands that employers have an incentive to stretch the truth regarding an employee's status.  Department of Labor understands this and the courts understand this.  So, every entity has some test to determine whether an employee is truly independent.  Kevin Christensen has written a nice summary of the different tests to determine whether an employee might be considered an independent contractor at his California Employment Blog.  You can also look at a helpful summary provided by the DOL.  

Among the most important factors is 1) the degree and nature of control of the work by the supervisor.  If the supervisor simply asks that a wall outlet be installed, then that employee performing the work may be a true independent contractor.  But, if the same supervisor instructs the employee to use 220 gauge Romex, specifies where and how to tie into existing wiring and provides the Romex wire and tools, then that so-called independent contractor may actually be an employee.  

Another important factor is 2) how integral is the work to the business.  If the business is a bakery, then it seems unlikely they would also be in the business of installing new wall outlets. 

Another important factor is 3) the extent to which the employer provides the equipment and materials of the purported independent contractor.  If a stationery supplier hires truck drivers via a third party, but provides the truck, then it is less likely that the third party is the true employer.  That is, if a) ABC Stationery Supplies provides the truck, b) XYZ Trucking Co. claims to be the true employer but does nothing other than issue a pay check, then it appears that the truck driver is actually employed by ABC Stationery.  As the DOL notes, context is everything.  These tests depend a great deal on individual facts.  

Perhaps the least relevant factor is how is the alleged employee paid.  Obviously, a true independent contractor would be paid by the project, not by the hour. 

The independent contractor distinction is very important. if an employer mis-classifies an employee as an independent contractor, then that employer could become liable for unpaid overtime for a time period of years. 

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 The US Department of Labor has filed suit against Child Protective Services for failure to pay overtime wages.  The state actually enjoys sovereign immunity from such suits.  So, if DOL does not initiate such suits, such a lawsuit might not be possible.  According to the suit, CPS workers have been told to work off the clock.  Yes, that would be a classic violation of the Fair Labor Standards Act.  See San Antonio Express News report.  The suit is the result of a lengthy DOL investigation. 

The suit seeks some $1 million in overtime wages for some 800 current and former CPS workers.  As if the caseworkers did not have enough to deal with already, they must also deal with overtime wage violations.  CPS continues to suffer from high turnover and low morale.  

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A federal judge in Iowa has ordered a company based in Texas to pay $1.76 million to former mentally disabled workers at a turkey plant.  The US Department of Labor was granted a partial summary judgment against Hill Country Farms doing business as Henry's Turkey Service.  Henry's housed the mentally disabled men in a dilapidated bunkhouse - which was eventually closed by the Fire Marshall. 

The judge's decision says the employer failed to pay the men in accordance with the Fair Labor Standards Act.  See San Antonio Express-News report.  The company violated the minimum wage and overtime provisions of the FLSA.  The mentally ill men, in their 50's and 60's lived in the bunkhouse with boarded up windows and space heaters for heat.  Henry's charged for room and board - the amount went up each year, while the wages remained the same.  The employer paid no more than $65 per week for each worker for some 20 years.  The amount was apparently based on the maximum amount allowed under Social Security regulations that would not trigger a decrease in benefits.  Yet, the men worked 40 hours per week and more.  See second San Antonio Express-News report. 

The judge ordered the employer to pay $881,000 in back wages and an equal amount in liquidated damages for a total of $1.76 million. 

in a separate action, the EEOC has also filed suit alleging discrimination and harassment against the 31 men. 

It takes a cold employer to abuse the most vulnerable in our society. 

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In a recent decision, the US Supreme Court ruled that the Fair Labor Standards Act does indeed provide protection for employees who complain or ask about wages orally.  The federal courts have disagreed on this issue for decades.  They all agreed that the FLSA protected employees who complained in writing about wages.  But, several courts found that the 1938 statute did not protect employees who complained verbally.   See Supreme Court decision.  The court voted 6-2 in favor of the employee. 

As the Court pointed out, the act was passed at a time when many workers were illiterate.  Just over 20% of manufacturing laborers in 1940 only had five years of schooling.  It was often simply not practicable to write up complaints in a workplace where work sites were dirty and special clothes were necessary.  Kasten v. St. Gobain Performance Plastic Corp., (3/22/2011). 

And, of course, truly, few employees would have the nerve to complain in writing.  But, many employees do indeed ask simple questions about wages and then suffer reprisal.  One of my clients once noted that a big box store failed to pay overtime to some seasonal employees.  My client simply asked one of the managers if that was kosher?  The client really thought he was just trying to help management and the workers.  Big box store never asked him to return - he was a seasonal employee himself.  If this decision had been issued sooner, that client could have filed some legal action about their reprisal against him. 

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It takes months for Texas Workforce Commission to complete an investigation of a wage claim.  See San Antonio Express News story.  TWC enforces the Texas Payday Statute and other laws.  They also investigate wage claims.  They receive 14,000 claims each year by workers who were not paid. But, as I have explained to many potential clients, do not expect much from TWC.  

Even if they conduct an actual investigation, they typically do nothing more than send a letter to the employer finding that the employer owes a certain amount of unpaid wages.  But, TWC does some good for workers.  In 2009, they found 5,977 claims to be valid and collected $4.7 million in unpaid wages.  See TWC's summary of the Texas Payday Statute here.  Note that contrary to frequent practice, the employer is not authorized to deduct items from a worker's paycheck or commissions unless the deduction is authorized by law or by signed agreement of the worker.  

Texas workers can also file a claim with the Department of Labor, Wage & Hour Division if the claim involves violation of minimum wage or overtime violations. 

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It was bound to happen sooner or later.  A lawsuit has been filed over the employer's requirement to check email after hours.  More and more employers are issuing Blackberries and their equivalent to employees with the stated or implicit understanding that the employee check email after hours.  Such a requirement runs right into the Fair Labor Standards Act, which requires that an employee be paid for time actually worked.  

The FLSA has been around since the 1930's.  The federal statute has plenty of precedent.  We know, for example, that if the employer requires attendance at meetings after hours, then the employer must pay for that time.  So, why would "email" time be any different?  

A Chicago police Sergeant has brought a class action lawsuit against his employer claiming that he was required to use his Blackberry on his own time.  Sgt. Jeff Allen is seeking overtime pay, because he was required to use his city-issued Blackberry after hours.  See report.  

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 Periodically, the Department of Labor issues guidance on interpretation of the regulations and statutes regarding the Fair Labor Standards Act.  The FLSA is the statute hat requires overtime pay and payment of minimum wage.  The DOL has issued an opinion recently stating that it now believes mortgage loan officers are not exempt employees and are, therefore, entitled to overtime pay.  According to one commentator, this new interpretation will apply to employees who work primarily in the employer's place of business and to employees who do not engage in cold-calling, contacting potential customers.  If you think you may have employees who fit these criteria, you should seek guidance regarding changes to be made as soon as possible. 

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One would think that law firms would follow the law.  Well, sometimes, its is more the opposite.  A medium sized Ohio law firm is sued for wage violations in its office.  The firm pays salary to secretaries and never pays overtime.  Lazzaro Law Firm in Cleveland represents some 40 secretaries in a class action law suit filed in US district court.  The secretaries were classified as executive, even though none of them supervised other employees or performed any managerial work.  

Anthony Lazzaro, the plaintiffs' lawyer, said he doubted this particular firm is the only firm to commit this violation.  Lazzaro specializes in wage and hour cases.   As one lawyer commented, this is probably a failry common mistake in many businesses and law firms.  

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 In a recent survey, over half of low wage workers were found to not be receiving as much pay as they have earned.  According to a study by the National Employment Law Project, the average worker lost $58 per week in unpaid wages.  About one-fifth of workers were not paid the prevailing minimum wage, but that amount varied by industry.  53% of laundry workers to 2% of construction workers ere not paid the minimum wage.  The survey focused on New York, which has a high rate of union activity in the construction trades. 

Even more common was the failure to pay overtime wages (1.5 times the hourly wage) to workers.  About one-fourth were not paid their normal hourly wage or simply not paid overtime at all, said the report.  The survey included some undocumented workers.  The survey estimated that some 315,00 workers in New York are not paid what they earned. 

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 Unlike many states, Texas has no statute or regulation addressing break periods in the work place.  So, in Texas we fall under the federal regulations.  Under 29 CFR Sec. 785.19 (http://www.access.gpo.gov/nara/cfr/waisidx_09/29cfr785_09.html), genuine meal periods are not work times.  The employee must be completely free from performing any duties during a genuine meal period.  For example, an employee required to eat at his desk is not truly relieved from his duties.  A meal time is not required. 

Contrary to what some people say, there is nothing in the federal regulations requiring a break period (outside of the meal break).  For example, when I worked in a warehouse many years ago, I was told we were entitled to a 15 minute break twice a day.  There is no such requirement.  But, federal regulations do provide that many employers provide such a break, 5-20 minutes long, to promote efficiency.  Such breaks are considered paid time.  See 29 CFR Sec. 785.19.  

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 Many employers seek to reduce cost by hiring independent contractors to perform some work.  The employer does not have to pay benefits to an independent contractor.  But, what is an independent contractor?  The IRS uses one test to determine whether an employee is a true independent contractor and not just an employee under a different name.  Department of Labor uses a different test.  But, a recent decision by the Fifth Circuit Court of Appeals addresses factors found in both tests.  

Cromwell, Et Al v. Driftwood Contractors, Inc. Et Al was decided on Oct. 12.  Cromwell and another man worked for Driftwood performing a great deal of electrical work in the aftermath of Hurricane Katrina.  Cromwell and his co-worker invested $70,000 in providing their own equipment, says Mike Maslanka.  They provided their own insurance and paid their own taxes.  They were so busy that they could not work for anyone else.  That factor made the difference, says Mr. Maslanka.  Because, the Fifth Circuit concluded they were so economically dependent on Driftwood that they were actually employees, and were not independent, at all.  

This was a Fair Labor Standards Act lawsuit.  Cromwell and his co-worker had filed suit for overtime wages.  By claiming overtime wages, Cromwell and his co-worker were claiming they were employees, not independent contractors.  Summary (ie, "quick") judgment had been granted in favor of the employer, Driftwood, at the lower court.  But, the Fifth Circuit reversed that summary judgment, a rare move for the Fifth Circuit.  So, economic dependence can make a difference, even to the Fifth Circuit.  

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 "You get a rest break every four hours," the seasoned warehouseman told me back in the 1970's.  He knew everything.  I just assumed he was right about this, too.  But, since then, I have never seen anything in law or regulation stating that workers were entitled to a 15 minute break every 4 hours.  But, there is a regulation encouraging employers to provide a rest break every so often.  "Encouraging" is not the same as requiring.  Now, I tend to believe the rest break tradition was simply a vestige of the days when collective bargaining agreements were much more common. 

I also heard there was a requirement for a meal break every so many hours.  That is also not necessarily true.  But, if your employer provides a meal break, they must not interrupt you unless they are paying you for that break.  As the regulation says, if the meal break is bona fide, then it cannot be worktime.  These regulations are all enforced under the Fair Labor Standards Act. 

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 State workers have it rough.  Yea, they have more job security than many private employees.  But, if they are not paid in accordance with the Fair Labor Standards Act, they cannot file suit against their employer.   That was the result of the 1999 decision in Alden v. Maine.  They also cannot sue their employer under the Americans with Disabilities Act or the Age Discrimination in Employment Act.  

The Texas equivalent of the ADA and the ADEA provide comparable protections.  But, the state version of the Fair Labor Standards Act has no teeth.  Most states have a law comparable to the FLSA.  A handful of states, including Texas, do not.  So, at least regarding wage violations, state workers have little or no recourse. 

The 1999 Alden decision was a 5-4 decision by the US Supreme Court.  That decision overturned decades of earlier decisions by lower courts.  So, yes, presidential appointments to the Supreme Court do matter.  

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 The federal minimum wage will rise from the current $6.55 per hour to 7.25 per hour, effective July 24, 2009.  This will be the final minimum wage increase under the law passed in 2007, the Fair Minimum Wage Act of 2007.  This increase applies, of course, to exempt employees.  See the Fair Labor Standards Act for more information. 

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 Rio Grande attorney, Aaron Ramirez, explains nicely the problems with seeking redress for wage violations from the Department of Labor.  As he says, its better to seek relief through a private attorney.

Aaron points out for example that DOL does not normally seek liquidated damages.  Liquidated damages is a phrase referring to monies used to compensate the victim of a wage issue for emotional issues and to help punish the employer.  

In my own experience, DOL does little more than *maybe* issue a finding that the employer has violated the Fair Labor Standards Act (the minimum wage law).  

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 Texas Workforce Commission is supposed to enforce the Texas statutes regarding wages.  A statute is a law passed by the state legislature.  TWC provides a nice summary of the Texas Payday Statute.  But, their summary does not answer one frequently asked question, when must an employer pay the last paycheck?  I am asked this often, since many employers withhold the last paycheck until Joe Employee turns in his tools, pays for a damaged rear view mirror, turns in her uniforms, or whatever.  

The employer has no choice.  The employer must pay the last paycheck within 6 days of the last day of employment.  See Tex.L.C. Art. 61.014.  But, what happens to an employer if they do not meet the six day deadline?  Not much.  The employer can incur a criminal penalty, but who will enforce that law and seek a criminal penalty?  In reality, no one does.   Most District Attorney's are far too busy to prosecute a crime they see as relatively minor. 

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 Many callers want to know about miscellaneous deductions from a paycheck.  Auto repair shops deduct for lost tools, long haul truck companies deduct for uniforms, everyone deducts for something.  Often, these employers deduct the wrong things in the wrong way.  Under the Texas Payday Statute, an employer can only deduct only what the law allows (such as income tax deductions) and what the employee agrees in writing.  

Of course, the penalty is weak: $1,000 fine or the amount of the deduction, whichever is less.  But, still, the law is clear.  Report any violations to the Texas Workforce Commission.  TWC may not do much.  But, even if all they do is send a letter finding the employer at fault, that can be helpful. 

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The Wage and Hour Division of the Department of Labor.  WHD enforces the federal minimum wage law.  Its supposed to, anyway.  Turns out, as we pretty much knew anyway, they do not.  A study by the General Accounting Office finds that 9 times out of 10, WHD misses the boat.  The GAO used undercover agents to pose as employers and employees to test the efficiencies of the system.  They found numerous omissions, oversights and plain lack of caring.  

In one case, WHD failed to investigate a complaint that under-age children in Modesto, California ere working during school hours at a meatpacking plant with dangerous machinery.  Some WHD investigators even freely admitted that they dropped cases when the employer failed to return phone calls.  In many instances, when the employee would complain, the WHD investigator would simply remind the employee that they can file suit. 

The terrible thing about that is minimum wage workers are just that, minimum wage workers.  They do not have money to go and hire a lawyer when WHD fails their duty.  And, truthfully, low wage workers often do not have enough money at state to justify a lawyer taking their case on contingency.  $500 can mean everything to an average worker, but that is not nearly enough to justify many lawyers taking the case on contingency.  

The study addressed another issue I have heard from many clients over the years: reaching WHD over the phone requires a heck of a lot of patience.  In the study, some 76% of phone calls went to voice mail.  As I have heard many times, WHD is not good at returning phone calls.  

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