United States Department of Labor

Wage and Hour Division (WHD)

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BEASLEY, Texas -- Pipe Coatings International LLC, doing business as PCI in Beasley, has paid $104,760 to 55 current and former shop employees following an investigation by the U.S. Department of Labor’s Wage and Hour Division that found violations of the Fair Labor Standards Act's overtime provisions.

“Employees were not being properly paid for all hours worked over 40 in a week,” said Cynthia Watson, regional administrator for the Wage and Hour Division in the Southwest. “Employees in this case worked as many as 70 hours in a week without overtime compensation. This practice is illegal and unacceptable.”

An investigation by the division’s Houston District Office found that the employer incorrectly had classified these workers as independent contractors instead of as regular employees during their first 90 days with the company. The employer paid the workers “straight time” for all hours worked during that time period, rather than paying time and one-half their regular rates for all hours over 40 in a week as required by the FLSA. After the workers’ probationary periods had ended, the company treated them as regular employees and paid the correct overtime compensation.

The misclassification of employees as independent contractors presents a serious problem for affected employees, employers and the entire economy. Misclassified employees often are denied access to critical benefits and protections – such as family and medical leave, overtime, minimum wage and Unemployment Insurance – to which they are entitled. Employee misclassification generates substantial losses to the U.S. Treasury and the Social Security and Medicare funds, as well as to state Unemployment Insurance and workers’ compensation funds. Misclassification also creates a competitive disadvantage for employers who comply with the law.

In addition to paying the back wages owed in full, PCI has agreed to stop misclassifying probationary employees as contract laborers and to classify all workers as employees upon hiring.

Under the FLSA, employers must distinguish employees from bona fide independent contractors. An employee – as distinguished from a person who is engaged in a business of his or her own – is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business that he or she serves. For more information, visit http://www.dol.gov/whd/regs/compliance/whdfs13.htm.

Additionally, covered employees must be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also are required to maintain accurate time and payroll records.

For more information about the FLSA and other federal wage laws, call the Wage and Hour Division’s toll-free helpline at 866-4US-WAGE (487-9243) or the division’s Houston office at 713-339-5500. Information also is available at http://www.dol.gov/whd.

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