Wages-Hours Decisions and Opinion Letters Archive: 1937 - 1995, [WAGES-HOURS 61-66 CCH-WH ¶30,905], Opinion Letter of the Wage-Hour Administrator, (Sep. 30, 1964), Department of Labor, (Sep 30, 1964)
[WAGES-HOURS 61-66 CCH-WH ¶30,905] Opinion Letter of the Wage-Hour Administrator.
No. 302, September 30, 1964
Fair Labor Standards Act
Coverage and Overtime Pay--Divers and Divers’Helpers.--Divers and divers’ helpers furnished by an interstate corporation to other firms upon request are employees, and not independent contractors, within the meaning of the FLSA; this is true even though they are unsupervised and furnish their own gear. In figuring hours worked for purposes of statutory overtime pay, time spent in diving and decompressing, time spent on vessels going to and from the diving sites, and standby time must be considered. Flat sums paid for a day’s work or a job and hazard or depth pay constitute regular earnings, except that a portion of the higher sums paid for hours in excess of eight daily or for days in excess of five weekly might qualify as statutory overtime pay.
Back reference.--¶25,126.
This is in reply to your letter concerning the application of the Fair Labor Standards Act to divers and tenders engaged in performing diving operations for a certain corporation engaged in interstate commerce.
The facts indicate that the primary operation of this corporation is to furnish divers to other concerns upon request. These firms engage this corporation when they need divers for a certain job. The corporation gets in touch with the diver at his home and relays information concerning the location and nature of the diving operation to him. An attempt is made to spread work evenly among all divers. The divers who work for subject corporation do not work with any other diving concern.
After receiving an assignment, the diver uses his own private vehicle in order to transport himself, his tender who works exclusively for him, and his diving gear to the designated wharf pick-up point. In the event a tender is unable to work on the job, the diver will inform the corporation which will advise him of other tenders who might be available. The diver must approve of the tender that will work with him. If the diver decides to get a new tender, he may do so, but this is rarely done.
The divers and tenders are never supervised by the corporation. This is the case because the divers and tenders are experienced and, therefore, are able to determine the best way to complete a given job. In accomplishing a given assignment, the diver determines the length of time that he can remain in the water and the amount of time he must spend decompressing in a chamber or under water after each dive. The length of time for decompressing is determined by the depth and length of time at a given depth. The decompression time varies up to several hours.
A diver and tender may have to stay at a job location from several hours to several days, depending on the number of dives, the needs of the concern requesting the dives, and the availability of a vessel to get the diver and tender back to the dock.
In some instances, while the diver is at a jobsite, he may be called upon to dive for another concern in the area if he is decompressed, and if the other requesting concern is within a reasonable distance of the area where the diver is working. The second requesting concern may contact the diver directly at the jobsite, or it may contact the corporation which will in turn contact the diver at the jobsite. In either event, the diver has the right to refuse the job assignment.
In some instances, the diver may be called at his home by the corporation to remain on standby when requested to do so by a concern. This “standby” means that the diver must remain where he may be contacted by telephone in order to receive instructions from the requesting concern. Sometimes the requesting concern will notify the corporation that it does not need the diver after having notified him to remain on “standby.”
The corporation pays the diver $40 per day regular time regardless of the number of hours worked so long as he was notified to be on standby or if he actually went to the jobsite. The diver receives an additional $10 per hour as overtime pay if he goes to a certain depth which requires decompression that would exceed the 8-hour day or if he actually works over 8 hours. After working 5 days in any one week, the diver is paid $60 per day for an 8-hour day. He also receives a hazard or depth pay figured in accordance with the depth of the dive. In addition, he receives $30 per day for furnishing his own gear and also a travel allowance determined by mileage. On salvage jobs the diver receives only a percentage of the profits. At the present time, the corporation withholds income tax and social security tax from the diver’s paycheck.
The tenders are paid on an hourly rate by the corporation, and one and one-half times the hourly rate for overtime. They are paid from the time they leave the dockside to the time they return to the dockside, less the usual eating and sleeping period. The minimum day is 8 hours. They are also paid for 8 hours when they are on “standby” even if they are not called to the jobsite. The corporation also withholds income tax and social security tax from the tenders’ pay.
In light of the above outlined situation, you would like to be advised as to the Department’s position with respect to the following questions:
(1) Are the divers and tenders employees of the corporation within the meaning of the Wage and Hour Law or could they be classified as independent contractors under the recent decision of Goldberg v. Warren Brothers Road Co., [45 LC¶31,304] 207 F. Supp. 99 (1962), and the case of U. S. v. Silk and Harrison v. Greyvan Lines, Inc., 331 U. S. 704.
(2) If they are not classified as independent contractors what would be necessary in order to have them reclassified as independent contractors?
(3) If the divers and tenders are employees under the act, how are their hours worked and hourly rate determined, and their wages computed to comply with the act?
(4) Is the hazard or depth pay included in the hourly rate?
In answer to your first question, we would consider the divers and tenders working under the circumstances you describe to be employees within the meaning of the Fair Labor Standards Act.
As you know, various tests by which independent contractors are distinguished from employees subject to the Act were laid down in a series of Supreme Court cases, McComb v. Rutherford Food Corp., [12 LC¶51,254] 331 U. S. 727; United States v. Silk, 331 U. S. 704; Harrison v. Greyvan Lines, Inc., 331 U. S. 704; Goldberg v. Whitaker House Corp., [42 LC¶31,090] 366 U. S. 28. These cases specifically hold that the traditional common law tests are not controlling but that the determination of the relationship depends rather upon the total situation, including the risk undertaken, the control exercised, and the opportunity for profit from sound management. As the Supreme Court declared in the Rutherford case, the determination of whether there is an employer-employee relationship under the Fair Labor Standards Act does not depend on “isolated factors” or upon any label, but upon the circumstances of the “whole activity” considered in the light of the statutory purposes and the Act’s own definitions, which are comprehensive enough to require its application to many persons and working relationships which, prior to this Act, were not deemed to fall within the employer-employee category.
The Supreme Court has made it clear that an employee, as distinguished from a person who is engaged in a business of his own, is one who as a matter of economic reality follows the usual path of an employee and is dependent on the business which he serves. As an aid in assessing the economic reality of the whole activity, the Court mentioned some of the characteristics of the two classifications which should be considered. Among these are (1) the amount of the investment by the so-called “contractors” in facilities and equipment, (2) opportunity for profit or loss, (3) the degree of independent business organization and operation, (4) the nature and degree of control by the principal, and (5) the degree of independent initiative, judgment, or foresight required for success of the alleged independent contractor. The Court specifically rejected the degree of control retained by the principal as the sole criterion to be applied.
The courts have also made it clear that persons may be employees within the meaning of the Act even though they are unsupervised in their work, are not required to devote any particular amount of time to their work, are under no restriction not to work for competitors of the employer, and supply their own equipment. Walling v. American Needlecrafts, [7 LC¶61,884] 139 F. 2d 60 (C. A. 6); Walling v. Twyeffort, [12 LC¶63,562] 158 F. 2d 945.
Applying the foregoing principles to the facts in your letter, it is our opinion that the divers and tenders are employees of subject firm rather than independent contractors. This employment relationship is evident by the fact that the divers, while having a substantial investment in equipment, nevertheless as a matter of economic reality “follow the usual path of an employee” and are dependent on and controlled to a great degree by subject corporation. They are in fact compensated like employees generally. In light of the Supreme Court cases cited above, we do not believe that the decision in Goldberg v. Warren Bros. Road Co., [45 LC¶31,304] 207 F. Supp. 99 (1962) is controlling. Accordingly, the tenders and divers must be compensated in compliance with the Fair Labor Standards Act unless they are otherwise exempted.
In answer to your second question, it is not possible for these Divisions to indicate with any degree of specificity what steps would be necessary to reclassify these employees as independent contractors. As we noted earlier, whether or not an individual is an employee or an independent contractor is not dependent upon mere classification. Rather, the determination is based upon the recognition of an existing employee-employer relationship as a matter of economic reality as discussed above. Since we think it clear that an employee-employer relationship under this Act now exists between the corporation, the divers and tenders, it is our opinion that a court would consider such a relationship to continue in the absence of clear and convincing showing of such a substantial change in the facts of the relationship that the termination of the employment relation and establishment of a clear identity of the former employee as an independent contractor are self-evident.
The answers to your third and fourth questions require consideration of the principles set forth in the interpretative bulletins on hours worked and overtime compensation, 29 CFR Parts 785 and 778.
The principles to be applied in determining an employee’s “hours worked” under the act are explained in Interpretative Bulletin, Part 785. As you will note, sections 785.10 through 785.23 explain that an employee must be compensated for all hours in which he is “suffered or permitted” to work. In the case of the divers and tenders in question, hours worked include all the actual time engaged in diving and decompressing, as well as all the time spent on vessels going to and from the diving sites. If the employees are on board the vessel more than 24 hours, they may have excluded from their hours worked bona fide meal and sleeping periods and certain offduty time under the conditions and requirements set forth in sections 785.16 and 785.22 of the bulletin. Whether the time spent by the employees in going from their homes to a vessel or job site and returning is to be considered hours worked depends on the circumstances in each individual instance. The principles which will be used to determine whether such travel time is to be included in the employee’s hours worked are set forth in sections 785.33 through 785.41 of the bulletin. The time spent by the divers or tenders on standby at their homes or other places away from the employer’s premises, which is paid for at the same basic rates as other work time, is time during which the employees are “engaged to wait” and is to be counted as hours worked under the principles explained in sections 785.7, 785.14, and 785.17 of the bulletin. See also section 778.7(f) of the overtime compensation bulletin, Part 778.
The method in which an employee’s regular hourly rate and overtime compensation are determined is explained in Interpretative Bulletin, Part 778. An employee, such as one of the divers in question, who is paid a flat sum for a day’s work or for doing a particular job, has his regular rate determined by totaling all the sums received at such day rate or job rate in the workweek, together with any additional compensation, exclusive of overtime premiums, for the work, and dividing by the total number of hours worked (determined as above explained) for which such sums are paid. This is explained in section 778.3(b)(3) of the bulletin. For the divers, the sums to be totaled in the determination of the regular rate are the daily rate of $40.00 for work up to 8 hours in the day, the daily rate of $60.00 for the days worked over five in a workweek (except to the extent that the premium part if any, of the sixty dollars ($20.00) can be excluded from the regular rate under either 7(d)(5) or 7(d)(6) of the Act and 29 CFR 778.5), the hazard or depth pay, and that portion of the $10.00 an hour received for hours worked over 8 in a day which equals the average hourly earnings for the nonovertime hours. The other part of the overtime pay paid for hours worked over 8 in a day is an overtime premium which may be credited towards overtime compensation due under section 7(d)(5) and 7(g) of the Act.
With reference to the application of sections 7(d)(5) and 7(d)(6) to payments at the rate of $60 for days worked in excess of five in the workweek, there may well be workweeks in which the premium part of the $60.00 (up to $20.00) may be excluded from the regular rate either under section 7(d)(5) or 7(d)(6) of the Act if either section is applicable, as explained in section 778.5 of the bulletin. Of course, in any workweek when additional sums are received by the employee as hazard or depth pay, then the regular rate would be more than $5.00 an hour in such workweek and section 7(d)(6), if otherwise applicable, would not be available in any case where the premium payment would be less than 1 1/2 times the rate (including depth or hazard pay) established for like work in nonovertime hours. However, if section 7(d)(5) applies, credit may be taken for that portion of the $20 extra payment which is in excess of the average hourly earnings for nonovertime hours, even though such overtime premium provides less than a 50 per cent increase over the regular rate computed by including the hazard or depth pay.
The travel allowance may be excluded from the determination of the employee’s regular rate under section 7(d)(2) of the Act if it meets the conditions explained in section 778.7(b)(3) or 778.7(b)(5) of the bulletin. The reimbursement that the diver receives for furnishing his own equipment may also be excluded from the employee’s regular rate if the amount of the reimbursement reasonably approximates the actual expense incurred, as explained in section 778.7(b), or if such amount reasonably represents the customary cost of renting such equipment.
The principles explained in this letter and the bulletins are guides which would apply under the general conditions described. The application of these principles to any actual employment situation would depend entirely upon the facts and circumstances of that particular situation.