Unpaid Overtime Claims In Energy Industry Keep Labor Lawyers On The Clock

By Miriam Rozen, Texas Lawyer
Galvin B. Kennedy, founding partner in Kennedy Law Firm in Houston. John Everett

A growing number of energy industry workers have turned to the federal courts to seek unpaid overtime claims against employers. Once well compensated, many of the workers lost jobs as oil prices fell. Those events prompted them to revisit their former employers’ pay practices and to allege that they are due overtime under the Fair Labor Standards Act, both plaintiffs and defense lawyers report.

The FLSA requires that nonexempt employees be paid at least the national minimum wage of $7.25 per hour for all hours worked, plus time-and-a-half their regular rates for hours worked beyond 40 per week.

The increase in FLSA lawsuits against energy industry employers is also recognized as lucrative by the plaintiffs bar. The potential yields are promising, thanks to the oil and gas industry tradition of companies paying workers high day rates, but rarely factoring in overtime compensation.

“These claims are worth a lot,” said Galvin Kennedy, partner in Houston’s Kennedy Law Firm, LLP, who represents workers in more than a dozen pending FLSA claims against oil and gas employers.

Kennedy expects such lawsuits to keep growing in number, given the revenues they reap. The litigation has kept defense lawyers busy too.

“We’ve got more than of it than I care to admit,” William Stukenberg, who defends energy companies, said about the FLSA lawsuits. “The plaintiffs bar moves from industry to industry, and this is the time the oil patch seems to be in their crosshairs,” said Stukenberg, a shareholder in Houston’s Jackson Lewis.

In contrast to other industries that previously attracted FLSA plaintiffs lawyers’ attention, energy-sector employers historically have paid workers high wages, and the compensation rose with the fracking boom.

“I think I could give up on this law thing and become a directional driller,” a defense lawyer reported overhearing another lawyer joke, sitting at a deposition of a fracking worker who made six figures a year.

But energy industry employers have also counted on their workers to log long days, sometimes 80 hours a week, without overtime pay.

So when plaintiffs lawyers argue successfully that the workers are due overtime, the damages awarded may be as much as $100,000 per plaintiff. FLSA plaintiffs may also win liquidated damages, or double their back pay, if the court finds that an employer that violated the FLSA also took an adverse action against employees who reported those violations. In addition, the FLSA statute allows the plaintiffs lawyers to file claims as collective actions, so other workers in the same situation may join. The FLSA also allows for attorney fees.

Increase in Claims

In the past three years, there has been a steady increase in the number of FLSA claims filed against energy companies, with an even more pronounced spike this year, according to data collected from PACER, the electronic record-keeping system of the federal courts. From the start of this year until May 15, 2015, plaintiffs have filed 80 FLSA lawsuits against employers with either the word “oil” or “energy” in their company names; during the same time period in 2014, plaintiffs had filed only 33 such suits. [See chart: “Fair Labor Standards Act Litigation in the Energy Industry,” this page.]

Jeff Price of Moulton & Price in Tyler previously represented employers defending against FLSA claims. But he now represents workers because of what he calls an explosion of plaintiffs.

“We live here in East Texas, and lots of guys are getting laid off from their good jobs. They are opting to hire lawyers,” Price said.

Often, the recently laid off energy workers recount for Price how their former employers treated them.

“They’d pay them well because they wanted to attract talent. But they’d give them a supervisor’s title and tell them they were exempt from the overtime laws. They might call him a safety supervisor, but in reality, the worker was driving a truck from job to job and doing miscellaneous jobs and no supervising,” Price said.

The employers were playing fast and loose with FLSA rules, but employees didn’t object until the downturn and the ensuing layoffs, Price said.

The DOL

The U.S. Department of Labor also has accelerated wage-and-hour enforcement actions against energy industry employers. In March 2015, the DOL announced that in an enforcement effort it had initiated in the energy industry in the Southwest, it recovered more than $1.3 million in 2014 for more than 1,300 oil field workers in New Mexico and West Texas.

“There is a misconception in the industry that—because workers typically earn more than the minimum wage—they are being paid legally. That is not always the case,” said Cynthia Watson, regional administrator for the Wage and Hour Division’s Southwest Region, said in a statement. “You can’t pay a flat day rate with no regard for hours worked, misclassify employees as independent contractors, or make deals with employees that violate labor laws.”

Notably, the DOL and private plaintiffs lawyers rarely act in tandem. Instead, plaintiffs lawyers often view the DOL as a potential rival.

“The DOL and the plaintiffs bar don’t necessarily coordinate,” Stukenberg said. When the DOL succeeds in getting overtime for a worker, “there is one less plaintiff that the plaintiffs bar can represent,” Stukenberg said.

Those dynamics may explain why plaintiffs lawyers are quick to discount the DOL’s effectiveness. “The employees are not interested in getting the DOL involved, because it creates a bottleneck. In the current environment, the DOL would do nothing but bring more heat,” Price said.

His clients collect higher damages than they would have if they had gone to the government, Kennedy said.

“The DOL is understaffed and underfinanced, and there is not a profit motive for them,” Kennedy said.

But government enforcers knocking at the door may ultimately extract more money from employers than private plaintiffs lawyers. Why? With enforcement actions, and the lawsuits it files, DOL has the option of seeking back wages for an entire class of employees; private plaintiffs lawyers typically represent only those employees who sign up with them, Stukenberg said.

Change in Pay

Faced with the spike in FLSA litigation, energy industry employers have started to change their day-rate pay structures. Defense lawyers have advised companies to revise their compensation policies to protect themselves; most large employers have done so, but some smaller ones in the industry have not yet received the memo, defense lawyers said.

Alan Bush, a principal of the Bush Law Firm in The Woodlands, who represents FLSA defendants,noted that energy industry employers need not tell their workers that fears about unpaid overtime litigation triggered the pay structure changes.

“Here’s the advantage for the industry right now. There are enough companies changing their pay rates, so you can say, ‘We’re changing our pay structure to be competitive with them,'” Bush said.

Expect no immediate end to the increase in FLSA lawsuits in the oil patch. Under FLSA, workers have two years to file unpaid overtime claims, and if the employer’s violation of the wage payment laws is willful, that time period extends to three years.

“Cases are just getting out of the chute,” Price said.

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