Employers engaged in the offshore energy industry should take caution.
The U.S. Department of Labor (DOL) is now imposing millions in back wage penalties against Gulf Coast staffing companies that improperly use per diem payments. After conducting a recent investigation, the DOL found that approximately 3,200 workers in the maritime and oil and gas industries have improperly received per diem payments for expenses they never incurred. This recent investigation is apparently part of an ongoing, multi-year initiative by the Wage and Hour Division. The DOL’s objective is to discipline employers who improperly pay per diem amounts to workers instead of wages.
Not all per diem payments are improper. When used appropriately, per diem payments are compensation for living expenses, such as transportation, meals and lodging, incurred on behalf of the employer when an employee is required to work at a distant or isolated location and must live away from home. Unlike wages, they are not factored into the calculation of overtime pay under the FLSA and are excluded from state and federal taxes.
However, per diem payments may not be given to compensate an employee for normal daily expenses (i.e. lunch), expenses incurred traveling to and from work (where the employee is not required to live away from home or establish a new residence at or near the place of work), or to pay an employee’s rent. Critically, employers may not base an employee’s receipt of per diem payments upon the number of hours that an employee works per day or per week.
Per diem payments had been the norm in the offshore energy industry, but the DOL’s recent enforcement activities dictate that employers should streamline policies to ensure FLSA compliance. For questions or comments regarding per diem payments please contact Brandon Davis at firstname.lastname@example.org.