For Payroll Purposes, is Your Seaman Really a Seaman?

As vessel operators, we pay close attention the provisions of the Jones Act and how they affect the operation, crewing and administration of our marine-based operations. A determination that your vessel-based crews are seamen under maritime law creates a different employment relationship when compared to employees designated as longshoremen or land-based employees. 

For example, under maritime law, seamen are entitled to maintenance and cure in the event that they sustain an injury while in the service of the vessel. They are also able to recover general damages and lost wages if they can prove that either negligence, or an unseaworthy condition aboard the vessel, caused the injury. 

On the other hand, a land-based employee, or a longshoreman, will receive compensation for these injuries under the applicable workers’ compensation scheme, and the employer will be immune from any further liability for the incident. 

For operational purposes, it is critical to know what type of employees you have on your vessel. Once you figure out the type of employees you have for operational purposes, you have to conduct another analysis to see what kind of employees you have for payroll purposes.

A Jones Act seaman may not be considered a seaman for payroll purposes under the Fair Labor Standards Act (FLSA). As such, despite maritime law designating your crew member as a seaman, a court could determine that your seaman does not fall within the scope of the seaman exception to the FLSA and find you liable for penalties and wages related to the overtime rules included in the FLSA.

The FLSA requires employers to provide overtime pay to any employee who works more than forty hours per week unless an exemption applies. The law assumes that all employees are entitled to overtime and the employer bears the burden of proving that an exception to the overtime requirement is applicable. The FLSA provides an exemption to the overtime requirements for “any employee employed as a seaman.” So, it would be reasonable to assume that any seamen working aboard your vessel, as determined by maritime law, would be exempt from the maximum hour requirements of the FLSA. But, the determination is not that clear.

The FLSA’s definition of a seaman differs from that of maritime law. The Jones Act interprets the definition of seaman “broadly to maximize the scope of the remedial coverage;” the exemptions under the FLSA “have been drawn narrowly … to minimize the number of employees who lose the Act’s protections.” As such, the rules are not consistent and pose a serious trap for the unaware.

Under the FLSA, an employee is considered a seaman when two criteria are met: (1) An exempted seaman must be subject to the authority, direction and control of the vessel’s master; and (2) the exempted seaman’s service must be directed to assist the vessel as a means of transportation. Pursuant to the Department of Labor regulations, non-navigational work becomes “substantial” if it occupies more than 20 percent of the time worked by the employee during a work week. Courts look to the nature of the work that the employee performs and not the description of the position or the place where the job is performed. As such, the application of the seaman exception to the FLSA is determined on a fact intensive, case-by-case evaluation.

The Federal Fifth Circuit Court of Appeals recently considered a FLSA overtime case involving a vessel-based ROV operator, and its employee, a vessel-based ROV Operator. The employee filed suit against his employer for overtime wages and penalties alleging that he was not a seaman under the FLSA. The employer argued that the employee was a seaman as he was a permanent member of the vessel’s crew and, as such, was exempt from paying overtime wages. The District Court found that he was a seaman covered by the exemption and dismissed the suit. However, the Court of Appeals reversed that ruling and reinstated the employee’s suit finding that he was not an employee covered by the overtime exemption and that his employer could be found liable for paying overtime wages.

The Court found that the ROV Operator was not assigned to the vessel in a position with the primary task of assisting the vessel as a means of transportation. Essentially, the Court held that the employee’s “primary purpose” must relate to the safe navigation of the ship for the seaman overtime exception to apply. Although, the Court found that some of the employee’s work was nautical in nature, the dominant employment had nothing to do with the navigation of the vessel as it was limited to operating the ROV, a purely operational task aboard the vessel that had nothing to do with vessel operation.

Another example where the classification of crewmembers poses a significant overtime wage risk can be seen by looking at the position of a vessel-based tankerman. If the primary purpose of a tankerman is to get cargo on or off of the vessel, the court would find that he is not a seaman for FLSA purposes. However, if a vessel-based tankerman is responsible for the constant monitoring of barges to ensure the safe navigation the vessel, the court could find him to be a seaman exempted from the overtime rule. Assuming that both tankermen were permanently assigned to their respective vessels, the Jones Act would consider them both to be seamen. However, the FLSA would treat both employees differently, exempting the latter from the overtime rules while making overtime mandatory for the former.

As crewmember tasks have become more specialized over time, it is important to look at the operational nature of each position to determine whether the job entails spending a significant portion of its time performing tasks that involve the operation of the vessel as a means of transportation. In addition to looking at the tasks performed by the crew member, you should also evaluate the command and control structure to see if the position reports to the ship’s master, or a non-navigational officer. Furthermore, if the position includes both navigational and non-navigational components, you could look at the position’s job descriptions and the company’s operations manuals to determine whether the company’s documentation indicates that this is a navigational based position, or not.

Although some employees will fall into clear categories of navigational or non-navigational positions, some positions will be hybrids. For those positions, the company should tweak the operational requirements of each position to ensure that more than 80 percent of the employee’s time is spent assisting the vessel in transportation to ensure the seaman’s exemption under the FLSA applies. If you can’t meet that requirement, it may be a good idea to modify your payroll system to pay any required overtime.

Although this issue has been around for some time, the Fifth Circuit’s recent holding presents us with a good reminder of the need to evaluate the operational nature of the positions that we have on board our vessels. As an award of past-due overtime wages, penalties and attorneys’ fees can be significant, it makes sense to take a close look at the nature of these positions before you are served with a lawsuit.

(As published in the July 2017 edition of Marine News)