In any oil industry, there are several, yet all important? sectors or elements that play specific and crucial purposes from procuring raw materials to the production and refining up to the commercialization of the oil product. There are those employees in a particular department that performs regular functions such as machinery maintenance, raw material extraction, refinery, delivery of final products to stations and many others.
It is also very important for the employer to contract other workers from other companies or industries to perform unique and highly specialized work such as those that provide drilling services, who mechanically drill and pump out underground crude oil; those that provide oilfield services, who help or assist the drilling companies in performing their tasks; and others. With such roles discussed, the people or employees described in the former can be classified as regular employees and the latter as independent contractors.
As mentioned, both perform specific and important roles but have different relations with the company or the employer. Recognizing these different relations is nonetheless important in establishing good relations between the company or employer and its constituents by imposing different policies and regulations. However, there are some issues in ambiguity in classification whether an employee is a regular employee or an independent contractor.
In general, an employee is regular if the employer has the power to control the person’s work processes, otherwise he or she can be classified as an independent contractor (Muhl, 2002). To set a clear line of demarcation between the two, the US courts have formulated three different tests, namely: the common-law test, the economic realities test, and a hybrid test that incorporates some various aspects from both of those tests. There are several differences in the treatment of the regular employees and the independent contractor as imposed by the Employment Development Department (EDD) of the State of California common laws.
It covers different working aspects such as instructions, required level of skill, continuing relationship, set of hours of work, full-time work, payments, right to fire or quit, and business decisions just to name a few (EED, 2000). Just to discuss some of the highlights of the treatment differences; in giving instructions, the employer has the right to give instructions to do the regular employee while the independent contractor decides how to do his or her job without the need of supervision from the employer.
As also mentioned, there is required high level of technical skill for the contractor in contrast with the low level of skill required for the employee. The existence of the continuing relationship of the employer and the employee depends on their arrangement which can be permanent or part-time. On the other hand, the relationship between the employer and contractor ends when the contractor’s job is performed. In general, in the set of hours of work or full-time work, an employer is due to impose the number of hours of work for his or her employee while the contractor is the “master” of his own working time.
The payment in terms of per hour, week or month is an indication of employer-employee relationship. The employee is also guaranteed of the minimum salary he or she is due. Meanwhile, the term of payment to the contractor is customary and is determined by the lump sum computed at a fixed rate (per hour) as the job gets done. The employer has also the right to fire or discharge any employee while this does not apply to the contractors however the relationship can be terminated with liability. However, an employee has the right to quit anytime as long as he or she does not have any incurring liability.
The contractor on the other hand is expected to be responsible for the satisfactory completion of a specific job. Lastly, an employee is unable to make business decisions while the contractor can do so for them to earn a profit or incur a loss. Employees can also be classified as exempt or non-exempt. The term exempt employees usually refer to executive, administrative or professional employees and are generally exempted to wage and hour laws specifically the Fair Labor Standards Act (FLSA) or the Wage and Hour Act. Hence, they are exempted to overtime pays.
Non-exempt employees oppositely refer to those who are affected by FLSA and are due to overtime pays, and refer to “non-professional employees”. For an employee to be classified as exempt, he or she must meet three tests namely: salary level test ($23,600 per year or $455 a month), salary basis test and the duties test (exempt job duties) as imposed by the FLA (FLA, 2003). Once these tests have been surpassed, necessary classification and other actions would be done. As mentioned earlier, an exempt employee is exempted or unaffected by the FLSA overtime rules.
But under the Act, the exempt employee is permitted to receive the full amount of the base salary in any work period in which he or she performs any work. Exempt employees are also relieved from “punch clocks” or “make-up time” due to absences. FLSA also does not limit the time of work an employer may expect to his or her employees. There are specific work aspects that FLSA has imposed for the welfare of the non-exempt employees (FLSA, 2003). This includes break and lunch periods, hours worked and overtime, on-call time, travel time, mode of wage and others.
All time in which the employee is required to be at the work place or premises and the regular shift time (including breaks and non-productive time) are classified as the work time. On-call time is not considered work time. Travel time is also not classified as work time but working while travelling needs to be compensated. The normal FLSA work period is 40 hours per week and working beyond this threshold would mean “overtime”. To calculate overtime, it is required that the employees get 1. 5 times of their regular pay rate in excess of the previously mentioned work period. Salary or wage is also by means of cash.