Ahead of the Class

Recently, the U.S. Department of Labor found that Marcellus Shale oil and gas contractors violated the Fair Labor Standards Act (FLSA), which resulted in the contractors agreeing to pay nearly $4.5 million in back wages to approximately 5,000 employees.

According to the Labor Department, most of the violations were due to the improper payment of overtime wages.

In some cases, employees’ production bonuses were not included in the regular rate of pay to determine the correct overtime rate of pay. Under the FLSA, all pay received by employees during the workweek must be factored when determining the overtime premium to be paid. Investigators also found that some salaried employees were misclassified as exempt from the FLSA overtime provision, and were not paid an overtime premium regardless of the number of hours they worked. Press Release, U.S. Dep’t of Labor (Dec. 9, 2014)

This upcoming year may bring more enforcement by the Labor Department in the oil and gas industry. According to the federal agency, this crackdown is part of an “ongoing multiyear enforcement initiative.” The oil and gas industry should pay particular attention. The Labor Department declared:

The oil and gas industry is one of the most fissured industries. 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. Given the fissured landscape, this is an industry ripe for noncompliance.

The oil and gas industry is also ripe for private FLSA collective actions by workers seeking to recover back wages for overtime violations or misclassifications of workers as independent contractors. There were 8,126 FLSA cases filed in the federal courts in 2014, an increase of nearly 5% over last year. But the oil and gas industry isn’t the only industry that should pay close attention in the upcoming year. The Labor Department “is examining potential wage and hour violations like these in other parts of the country.”

Helping to lead the investigations at the Labor Department is David Weil, head of the Wage and Hour Division. Earlier this year, Weil authored a book entitled, “The Fissured Workplace,” in which he examines how the growing number of companies that outsource work has changed the nature of employment in the U.S. economy. Weil describes how instead of a direct employer-employee relationship, there is often a network of contractors, subcontractors, or franchisees in between. In particular, Weil found that businesses run by franchisees had more wage-and-hour infractions than those operated directly by corporations. According to Weil, the Labor Department will go after industries that have this “fissured” structure, which includes both the fast food and hotel industries.

The International Franchise Association reports that there are 757,000 franchise businesses in the country that employ 8.3 million workers. Given this enforcement direction announced by the Labor Department, it is fair to say that the fast food, fast casual restaurant, and hotel industries, like the oil and gas industry, should pay close attention to their wage and labor practices in the upcoming year.