Oil and Gas Industry compliance with Overtime Wage and Labor Laws – Marcellus Shale Fracking

Many employers in the unconventional oil and gas extraction industry have paid employees the same way for years according to what they believe is the industry norm – whether it be day rate, hourly, piece rate or salary.  The problem being that they have not paid their non-exempt employees time and a half for the many hours of overtime they work.  Instead, they improperly classify workers as exempt from the FLSA and pay the day rate, straight time, salary rate or piece rate to cover all hours worked each week.  This triggers a wage and hour violation that results in the substantial underpayment of their workforce.  While the industry pay practices may be common, it does not mean they are in compliance with state and federal overtime laws and does not excuse violations.

A case in point involves a Pennsylvania based oil field environmental services company that collected water samples from property owners near oil and gas well drilling sites for the purpose of conducting baseline sampling surveys.  An investigation found that the company improperly classified nonexempt employees, such as junior environmental scientists and junior baseline samplers, as exempt from overtime pay, and paid them straight time for all hours worked, rather than time and one-half their regular rates of pay for hours worked in excess of 40 in a workweek. The employees were paid on an hourly basis, but were not paid an overtime premium for field work and were not compensated for hours worked in the office. The company also failed to keep accurate records of hours worked by these employees as required by the overtime pay laws.

The company tried to claim that employees who gathered water samples from their assigned areas were professionally exempt from overtime, but this did not fly because these employees were not required to have advanced knowledge to perform their duties.

For the learned professional employee exemption to apply, the following tests must be met:

  • The employee must be compensated on a salary or fee basis at a rate not less than $455* per week;
  • The workers main duty has to be work that requires advanced knowledge which is mostly intellectual in nature. It must also require an employee to use discretion and judgment on a routine basis;
  • The advanced knowledge must come from the field of science or learning; and
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

* The Department of Labor under the Obama Administration increased this salary amount to $913 per week effective 12/1/2016; however, this increase was blocked by a court ruling. The Trump Administration is now reconsidering these changes and appears to favor a lower minimum salary amount. Please see this page for the latest updates.

Long standing pay practices change slowly and the overall awareness of workers’ rights to overtime pay remains relatively low in the oil and gas business.  Change is, however, being brought on primarily as the result of investigations and lawsuits initiated by workers who realize they are likely being cheated and decide to take action to correct it.  Through these cases, literally hundreds of millions of dollars of unpaid overtime wages are being recovered and put back where they belong – in employees’ pockets.  Claims for unpaid overtime can recover not only the unpaid back wages, but an equal amount for “liquidated damages” (i.e. $200 for every $100 of unpaid overtime) plus attorneys’ fees.

There is currently a multiyear enforcement initiative focused on vendors who perform various phases of the oil and gas fracking process on the Marcellus Shale formation located beneath the commonwealth of Pennsylvania and the state of West Virginia. Initiative efforts, in this fast growing industry, seek to inform workers of their rights and ensure FLSA compliance among oil and gas companies and other related businesses, including but not limited to mudlogging, coil tubing, inspection, disposal services, environmental cleanup, surface rentals, solids control, seismic services, tree clearing, quarries, road construction, paving, masonry, haulers of water and stone, and other types of support or ancillary service providers.

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