PHILADELPHIA, Pa. — According to the U.S. Department of Labor, thousands of workers employed by contractors engaged in natural gas extraction in the Marcellus Shale region of Pennsylvania and West Virginia are putting in a fair day’s work but not receiving a fair day’s pay.
An ongoing multi-year enforcement initiative conducted by the agency’s Wage and Hour Division offices in Wilkes-Barre and Pittsburgh from 2012 to 2014 found significant violations of the Fair Labor Standards Act which resulted in employers agreeing to pay $4,498,547 in back wages to 5,310 employees.
The division’s investigators attribute the labor violations in part to the industry’s structure.
“The oil and gas industry is one of the most fissured industries,” Dr. David Weil, division administrator said. “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.”
Large energy providers such as Chesapeake Energy, Citrus Energy and Anadarko Petroleum are engaged in site exploration and production in the Marcellus Shale region. These companies own the mineral rights and secure the technical and specialized workforce needed to identify natural gas well extraction sites, develop well sites, complete drilling and bring wells on-line for production. The providers then use subcontractors for the majority of the work performed on the extraction, or “well” site. The subcontractors include drilling and geological services, land leasing and acquisition service, and oilfield support services companies.
Secondary subcontractors are often hired for more specialized work and ancillary support services like welding, laboratory services, landscaping, pipeline maintenance, safety and traffic control, and water treatment. Frequently, this level of services does not take place directly at the well sites.
The majority of violations were due to improper payment of overtime. In some cases, employees’ production bonuses were not included in the regular rate of pay to determine the correct overtime rate of pay.
Investigators also found that some salaried employees were incorrectly classified as exempt from the FLSA overtime provision, and were not paid an overtime premium regardless of the number of hours they worked.
Under the FLSA, all pay received by employees during the workweek must be factored when determining the overtime premium to be paid.
“The more fractured an industry is, the more likely there will be significant labor law violations,” Mark Watson, regional administrator for the Northeast said. “Companies further down the contracting chain feel pressured to provide services at a competitive and often cut-rate price point. They are also more likely to cut corners and offer a low bid to secure a business opportunity.”
The ongoing enforcement initiative began in 2012. In addition to the Pennsylvania and West Virginia investigations, the agency is examining potential wage and hour violations in other parts of the country.
“The Department of Labor is committed to protecting working families who bear the greatest burden when labor standards are violated,” said U.S. Secretary of Labor Thomas E. Perez. “Recovering wages for these workers will help them pay the rent, buy food for the table and clothing for their children. And it will help ensure that employers who play by the rules and pay their employees the wages they have earned are not undercut by those who gain advantage by cheating the system and their workers.”
The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 per hour, as well as time and one-half their regular rates for every hour they work beyond 40 per week. The law also requires employers to maintain accurate records of employees’ wages, hours and other conditions of employment, and prohibits employers from retaliating against employees who exercise their rights under the law.
The FLSA provides that employers that violate the law are, as a general rule, liable to employees for back wages and liquidated damages payable to the workers.
More information about the FLSA can be found by calling the Wage and Hour Division’s Philadelphia Regional Office at 215-861-5800 or the division’s toll-free helpline at 866-4US-WAGE (487-9243). Information is also available at http://www.dol.gov/whd.