$687,469 in Overtime Back Wages for Misclassified Workers

Friday, June 7, 2013

Honghua America LLC has paid $687,469 in overtime back wages to 133 roughnecks and crane operators after an investigation by the U.S. Department of Labor’s Wage and Hour Division found violations of the Fair Labor Standards Act’s overtime provision at its equipment manufacturing facility in Houston.

The investigation conducted by the division’s Houston District Office found that Honghua improperly labeled workers, employed as roughnecks and crane operators, as independent contractors. The firm paid the workers straight time for hours worked over 40 in a week, rather than time and one-half their regular rates of pay for hours worked in excess of 40 in a workweek. Employees worked as many as 80 hours per week at the company’s 20-acre Houston facility, without any overtime compensation, as required under the FLSA.

Honghua, one of 10 subsidiaries of Honghua Group Limited, a large-scale equipment manufacturer and drilling service provider, specializes in research, design, manufacture and set-assembly of drilling rigs, offshore engineering and oil and gas exploration and production equipment. It is the biggest exporter of drilling rigs in China, and one of the largest land drilling rig manufacturers in the world. The company has agreed to fully comply with the FLSA in the future. Back wages have been paid in full.

Too often, business models and practices result in employees being misclassified as something other than an employee, such as independent contractors or LLCs. Under the law, however, whether someone is an employee is determined by the actual relationship between the worker and the business—not by label or registration. Similarly, simply providing employees with 1099 forms instead of W-2s does not transform them into legitimate independent contractors under the FLSA. Misclassifying employees can result in workers being denied minimum wage, overtime pay, unemployment insurance and workers’ compensation benefits. This makes it harder for low-wage workers to put food on the table and provide for their families. It means a greater chance of working in unsafe conditions and not being compensated when hurt on the job.

The FLSA requires that covered employees 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.

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