DOL RECOVERS $4.5M IN WAGES FOR PA., W.VA. GAS WORKERS
While employers of all types have been under increasing scrutiny by the United States Department of Labor for their overtime and other pay practices, the DOL has paid extra attention to employers in the energy industry. The piece below from Employment Law 360, announcing that the DOL’s focus on that sector has resulted in a great deal of wage and hour liability for oil and gas employers in Appalachia, is a great reminder that those employers need to be vigilant when it comes to both their classification determinations and wage payment compliance in general. To try and avoid the DOL’s crosshairs and other similar wage and hour headaches, consultation with competent counsel is advised.
Law360, New York (December 10, 2014, 12:03 PM ET) — After a two-year investigation, the U.S. Department of Labor recovered about $4.5 million in back wages for more than 5,000 oil and natural gas extraction workers who were denied overtime pay in Pennsylvania and West Virginia, the agency announced on Tuesday.
The DOL’s Wage and Hour Division conducted its investigation of dozens of contractors and subcontractors from 2012 to 2014 in the Marcellus Shale region that spans both Pennsylvania and West Virginia, and found “significant” violations of the Fair Labor Standards Act. The agency said that the investigation that led to the recovery of $4.5 million for 5,310 employees revealed an industry structure that perpetuates such violations.
Major energy companies engage in site exploration and production in the area, but outsource the bulk of their production tasks to subcontractors who often have their own subcontractors, according to the DOL. The agency found that the subcontractors were ripe with violations.
“The oil and gas industry is one of the most fissured industries,” Wage and Hour Division Administrator David Weil said in a Tuesday statement. “Job sites that used to be run by a single company can now have dozens of smaller contractors performing work, which can create downward economic pressure on lower level subcontractors.”
During the investigation, the DOL found that a majority of the labor violations involved a failure to pay proper overtime.
In some instances, an employee’s production bonuses were not included in the regular rate of pay to determine the correct overtime rate. That violated the FLSA, which requires all pay received during the workweek to be factored into overtime rate determinations, according to the agency.
DOL investigators also found that some salaried employees were misclassified as exempt from overtime, the agency said.
The industry is set up around large energy providers which own mineral rights and line up the specialized workforce required to identify and develop well extraction sites, complete drilling and bring wells online. Those larger companies use subcontractors for most of the extraction-related work, such as drilling and geological services, land leasing and acquisition service, in addition to oilfield support services, according to the DOL.
Those subcontractors then hire other subcontractors who specialize in services such as welding, laboratory work, landscaping, pipeline maintenance and traffic control, according to the DOL. The fractured framework of subcontractors, which do not always all work on-site, makes FLSA violations more likely, the agency said.
The agency recovered the most back pay from Greene’s Energy Group LLC, an international company that provides services such as drilling, testing and production operations. Greene’s had to pay about $1.1 million for violations at 13 different sites in and around Wilkes-Barre, Pennsylvania. Another company, Alberta, Canada-based Nesi, paid $1.05 million, making the two companies the bulk of the DOL’s recovery, according to data the DOL provided to Law360.
In addition to the investigation in Pennsylvania and West Virginia, the DOL is currently investigating wage violations in the oil and natural gas industry in other parts of the country.
“It will help ensure that employers who play by the rules and pay their employees the wages they have earned are not undercut by those who gain advantage by cheating the system and their workers,” U.S. Secretary of Labor Thomas E. Perez said in the Tuesday announcement.