FLSA Issues In The Oil And Gas Industry

Natural gas extraction in the Marcellus Shale region of Pennsylvania has brought millions of dollars and thousands of jobs to the area. However, this growth has come at the steep price of employment lawsuits in which workers have claimed they are owed overtime and related damages pursuant to the Fair Labor Standards Act (FLSA).

The U.S. Department of Labor’s offices in Pittsburgh and Wilkes-Barre conducted a multiyear study concerning FLSA violations in the region’s oil and gas industry. [1] This study revealed that from 2012-2014, employers paid $4,498,547 in back wages to 5,310 employees. [2] Wage and Hour Division investigators attributed the FLSA violations to the unique structure of the industry: the oil and gas industry is highly divided. Large oil companies such as Chesapeake Energy, Citrus Energy and Anadarko Petroleum identify drilling sites, secure the mineral rights and find sources of labor to extract the oil. These companies typically hire contractors who perform drilling, geological services and oilfield support services. Contractors will often employ subcontractors for specialized areas of labor such as welding, safety inspection, pipe maintenance and chemical testing. [3] Multiple smaller companies and contractors may be employed at a single site. The fractured nature of the industry can create a downward economic pressure on smaller contractors and subcontractors, who are operating at narrow profit margins. Companies further down the contracting chain often feel pressured to keep their prices competitive. The cost-cutting may come at the expense of labor and wages. According to Dr. David Weill, administrator of the Wage and Hour Division, “Given the fissured landscape, this is an industry ripe for noncompliance.” [4]

Most of these employment law cases involve workers who challenge their classification of being exempt from FLSA requirements. It was a common practice for companies to classify oil and gas workers as administrative employees to whom the FLSA does not apply. As oil and gas workers increasingly challenge their classifications in court, businesses must reevaluate their personnel and wage policies in order to avoid costly litigation.

Contact Hardin Thompson PC

Our employment law attorneys represent companies in the oil and gas industry. To schedule an appointment regarding your goals and concerns, please call 412-315-7195 or complete our contact form. With offices in Pittsburgh, Philadelphia, Detroit, New York and Tampa, Hardin Thompson PC provides employment law services throughout the United States.

[1] Hawkins, Joanna. “News Release.” WHD : US Labor Department Helps More than 5,300 Pennsylvania and West Virginia Oil and Gas Workers Recover $4.5M in Back Wages for Unpaid Overtime [12/09/2014]. US Department of Labor, 9 Dec. 2014. Web. 26 Dec. 2014. <http://www.dol.gov/opa/media/press/whd/WHD20141883.htm>.

[2] Id.

[3] Id.

[4] Id.