$4,498,547 in Back Wages for Wage and Hour Violations in the Natural Gas Extraction Industry

Wednesday, December 10, 2014

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 multiyear enforcement initiative conducted by the U.S. Department of Labor'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. Wage and Hour Division investigators attribute the labor violations in part to the industry's structure. 

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. Under the FLSA, all pay received by employees during the workweek must be factored in 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.

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 ongoing enforcement initiative began in 2012. In addition to investigations in Pennsylvania and West Virginia, the agency is examining potential wage and hour violations like these in other parts of the country. 

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.

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