The Department of Labor (“DOL”) announced in late 2012 it was launching a multi-year wage and hour enforcement initiative on Marcellus Shale contractors operating in Pennsylvania and West Virginia. Following that announcement, DOL has issued several reports about the success of its efforts to recover what it describes as “a fair day’s pay.”
The most recent DOL press release, issued December 9, 2014, involved investigators from the Wage and Hour Division Offices located in Wilkes-Barre and Pittsburgh. DOL announced it had secured agreements from employers to pay almost $4.5 million in back wages to 5,310 employees, primarily to remedy overtime wage violations.
Examples of violations cited by DOL included the misclassification of some salaried employees as being exempt from overtime and the failure to include production bonuses paid to hourly employees in the regular rate for purposes of calculating overtime.
DOL attributes the prevalence of violations in part to the fractured nature of the extraction industry, which frequently involves the use of dozens of small contractors performing work on one job site and other contractors providing ancillary services away from the site. Those contractors are said to face significant competitive bidding pressures, which increases the likelihood of cutting corners.
The DOL enforcement initiative continues, and as can be seen from the most recent example, the costs of noncompliance can be substantial. DOL audits typically look back two years and in the case of willful violations, lost wages and other damages, including double damages, can be sought for three years. Employers must continue to be proactive in installing and monitoring FLSA-compliant pay practices and provisions.
What Can an Employer Do in the Face of the Ongoing Initiative?
As we have previously recommended, employers should periodically audit their pay practices and procedures. Examples of what should be reviewed in the internal audit include the following:
Record keeping: Computer-based payroll systems will contain the information necessary to meet most wage and hour 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 three years.
Employee vs. Independent Contractor: Practices in the oil and gas industry often are at odds with the test used by the Wage and Hour Division 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 overtime requirements that 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, and changing job responsibilities can affect the exempt determination.
Compensable Time: A major area of litigation in recent years has centered on what should be considered time worked—and therefore compensable—and counted toward overtime hours. This includes use of cell phones and computers outside 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 ensure the commute from home to work is not compensable.