The U.S. Department of Labor (“DOL”) Wage and Hour Division (“WHD”) announced in December of 2012 the recovery of $187,165 of wages for 69 employees as part of its multi-year ongoing enforcement initiative focused on vendors performing services for the fracing and pipeline industry.  Following an audit by the DOL, the employees in question were found not to be eligible for the “professional” exemption to the overtime requirements.  The employees primarily worked collecting samples for environmental monitoring.
 

    The federal wage/hour law under the Fair Labor Standards Act (“FLSA”) includes the requirement to pay “non-exempt” employees time and one half of their “regular rate” for work in excess of 40 hours in a work week.  The shale gas industry in the tri-state region (e.g., Ohio, Pennsylvania and West Virginia) can generate complex wage/hour issues due to the around-the-clock nature of certain of its operations and the variety of skills and occupations providing services.  Therefore, prudent employers will exercise extra measures of diligence to ensure compliance with wage and hour matters.

What Can an Employer Do in the Face of the Ongoing Initiative?

     Employers may consider having an internal audit performed. The internal audit would address the following topics:

• Record keeping:  Computer based payroll systems will contain the information necessary to meet most WHD requirements.  Time worked and bonus calculation records should be kept as part of the pay records.  Pay records should be kept for a minimum of 3 years.
• Employee vs. Independent Contractor:  Practices in the oil and gas industry often are at odds with the test used by the WHD to determine who is an employee and who is an independent contractor.  Specific arrangements with independent contractors in areas such as training, welding and environmental monitoring are potential areas for review.  The use of an independent contractor should be well documented.
• Exempt vs. Non-Exempt:  The exemptions from the overtime requirements which are often at issue in the shale industry include whether the employee meets the criteria to be exempt under the “salaried basis,” “professional,” “executive” or “administrative” categories.  Determining if the employee meets the exemption criteria can be extremely fact intensive.
• Compensable Time:  A major area of litigation in recent years has centered on what should be considered to be time worked--and therefore compensable--and counted toward overtime hours.  This includes the use of cell phones and computers outside of normal working hours.  Travel time can also be an issue in circumstances where the employer provides a company vehicle and allows the employee to take the vehicle home after work.  The employer should have a written policy on the use of take-home vehicles to insure that the commute from home to work is not compensable.

Be Aware That Noncompliance with the FLSA Can Result In Considerable Costs!

    The FLSA has provisions for doubling the amount of unpaid wages and overtime, attorney fees and for a special form of class action.  When current or former employees hire private counsel to prosecute FLSA claims, the employer can expect a class action suit for double damages going back three years under the FLSA, as well as a companion claim of violations of the applicable state wage payment law and state overtime law.  State laws are often used because some state law provisions are actually more favorable to the employee than the FLSA.  Such is the case in matters including the use of class actions, the scope of exemptions and the calculation of overtime.

Conclusion

    Armed with the knowledge that DOL is targeting shale gas companies for wage and hour violations, savvy executives and managers will consider pre-emptive measures, such as those mentioned herein, to guard against possible penalties and sanctions.