Wage and Hour Litigation is on the Rise: 6 Steps You Can Take Now to Protect Your Business

wage and hour litigation

We are seasoned employment litigators and we know a thing or two about the plight of companies battling wage and hour class and collective actions in the oil and gas industry.  We’ve seen it before: downturns in the oil and gas industry often correlate with a rise in employment litigation – especially wage and hour litigation, in which workers claim that companies failed to pay them correctly for all hours worked.  As we go deeper into the fourth quarter of 2020 and look ahead to 2021, one thing is certain in our minds:  we will continue to see an onslaught of these claims in the industry.  The question we want to pose now is:  what are you doing to protect your company?  Here are six steps you can take to better protect your business against the rising tide.

Audit Your Exempt Classifications  

Front-line supervisors classified as exempt from overtime are often targeted by plaintiff lawyers looking to initiate class and collective actions on behalf of similarly situated workers.  If you haven’t obtained an opinion from counsel on whether these positions are properly classified (i.e., rig supervisors, wireline crew supervisors, etc.), you may be depriving yourself of important defenses in litigation.  Do an audit now.

Revisit Your Day-Rate Pay Schemes

Paying a “day rate”—a predetermined amount based on each day worked, regardless of the number of hours actually worked—is common in the energy sector.  However, employees paid a day rate are often owed overtime premiums in addition to the day rate for hours worked over 40 in a workweek.  Do not assume that you can avoid liability because you believe overtime premiums are “built in to” the day-rate pay practice.  An experienced wage and hour lawyer can assist you in evaluating whether your day-rate pay structure will withstand scrutiny under federal and state law.  Consider whether you need to change your day-rate practices now.

Check Your “Regular Rate” Calculations Especially When Bonuses are Paid

It is common for companies in the energy sector to pay employees bonuses, e.g., production bonus, job bonus, well completion bonus.  Even though plan documents, emails and other communications may state that payment will be made in the company’s “sole discretion,” as a matter of law, the bonus may be considered “non-discretionary.”  And, if a bonus is non-discretionary, except for a limited number of circumstances, you may be required to make adjustments to overtime premiums. Check your payroll calculations now.

Make Sure Per Diem Payments Are Properly Characterized

There has been a recent spike in litigation involving plaintiffs who are alleging that per diem payments are actually a form of disguised compensation.  Ask yourself:  Are your per diem payments made to employees for expenses they have actually incurred and, also, are the expenses actually related to the business?  Have you talked to counsel about whether or not you need to develop an “accountable plan”?  Have you communicated with employees that they need to return any excess amounts paid to them that either were not incurred or substantiated?  There are many more important questions – but, if you haven’t started with these questions, you need to re-group with counsel now.

Have You Reviewed Your Contract Documents?

We continue to see a significant rise in joint employer / independent contractor litigation. Don’t make the mistake of assuming you’re not a joint employer and/or your workers are properly classified as independent contractors (as opposed to an employee) just because you have an agreement in place.  If you haven’t done so lately, you should be reviewing your contract documents (think:  master service agreements, statements of work, independent contractor agreements, etc.) to ensure they include the proper risk-shifting and/or risk-limiting provisions such as indemnification clauses, representations, warranties and limitations of liability.  

Consider Implementing an Arbitration Agreement with a Class Action Waiver

If you haven’t considered implementing an arbitration agreement with a class and collective action waiver, you may be missing out on one of the best opportunities to minimize catastrophic employment risk to your business.  Class and collective actions are common in wage and hour cases and they can be expensive to litigate, to say nothing of the fact that class and collective action settlements and/or judgments can be crippling.  A well-crafted arbitration agreement with a class and collective action waiver can be used offensively to shut down many class and collective actions, turning them in to single-plaintiff cases, before they ever get off the ground.  Have the conversation in your business, and with counsel, as to whether this type of agreement is appropriate for you.

Obviously, this list of items is only the beginning – there is a lot you can be doing now to position your company for success.  The point is this:  don’t delay.  The number of wage and hour claims will only rise with time and the efforts you undertake now will almost certainly pay significant dividends in the months and years to come.   

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