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Interesting Read on Lawsuits in Oil and Gas Industry

After 18 years of working as an inspector, Greg McGeary took his first job in oil and gas last winter inspecting pipelines in the Marcellus Shale for a Florida-based startup.

It was a predictably tough gig — walking a pipeline in all types of weather and driving three hours a day to and from remote locations. That’s why the pay, what would amount to $150,800 a year for a typical work week, was high. But in oil and gas, there may not be such a thing as a typical work week.

This was Mr. McGeary’s first experience with a dayrate — $580 a day in his case — a common practice in the industry that many firms now are changing under mounting pressure from government regulators and civil lawsuits. 

Lawyers involved in these types of suits say they are, in part, a symptom of the boom and bust culture in the oilfield: the boom brings in industry novices and exposes workers to long, hectic hours and the bust sends some looking for compensation they feel they couldn’t reap during peak time.

“I was told that the job was six days a week, 10 hours a day,” he said. But when he worked more than that, his pay remained the same.

Mr. McGeary’s job was to follow welders and check their work. Where pipelines crossed streams or other bodies of water, the workers had 24 hours to restore the sites to their original condition, which sometimes meant working well past his promised schedule. 

Many days he didn’t know “when or if” he’d be returning home.

“I put my family through hell,” Mr. McGeary said. “I have a little girl who plays softball and I’d tell her, ‘I’ll take you to your game at night.’ I’m supposed to be done at 4 o’clock. And 4 o’clock rolls around and they say, ‘Oh, no,’” extending his shift for another eight hours.

The day rate was blind to the twists and turns of the job.

When Mr. McGeary bought his concerns to the company, “I was just told that I agreed to a 10-hour day and it didn’t matter that we sometimes had to work more — that’s all that they could pay me. In one particular instance, I worked 30 straight hours and I was told I could only get paid for 10,” he said. The company, North American Pipeline Inspection, denies that Mr. McGeary worked that long.

After five months on the job, Mr. McGeary quit and went to work for another pipeline firm, returning to an hourly wage. Two months later, in July, he filed a collective action lawsuit against North American Pipeline Inspection, on behalf of all of its employees in a similar predicament. About 30 other former workers have joined the lawsuit.

North American Pipeline Inspection is down to six employees and none work more than 40 hours a week, according to the company’s attorney J. Kenneth Hardin II, partner at Hardin Thompson, PC. Their shrunken work schedules are the result of both the downturn in oil and gas activity over the past year and a reaction to the lawsuit, though the company believes Mr. McGeary and other plaintiffs were not entitled to overtime because they qualify under an exemption in the Fair Labor Standards Act.

According to Mr. Hardin, the company’s pipeline inspectors are highly-paid professionals with discretion and decision-making authority — something that exempts them from the requirement that employees working more than 40 hours a week receive time-and-a-half pay.

“These aren’t blue collar laborers as they want to say that they are,” Mr. Hardin said. “These are highly skilled, highly compensated” professionals.

While most such lawsuits end up in settlements, and Mr. Hardin doesn’t exclude the possibility, North American Pipeline Inspection believes it has done nothing wrong.

Lawsuits on the rise

Across the shale plays, overtime lawsuits, the result of a tangle of market and government factors, are on the rise.

Last month, attorneys at Babst Calland in Pittsburgh warned that such cases “have flooded the Pennsylvania and Ohio dockets” in the past year. There are at least 25 such suits in western and central Pennsylvania, they calculated, and urged oil and gas companies to review their employment practices.

“It’s not just the oil and gas industry,” said John McCreary, a Babst Calland attorney who wrote the bulletin. “Many employers just don’t understand what the law requires.”

The Fair Labor Standards Law has been on the books for more than eight decades, he said, but “there’s a common misconception in the country that as long as I pay someone a salary, they’re exempt (from overtime). And while it’s true that all exempt employees are salaried, not all salaried employees are exempt.”

At least some of the recent attention to overtime practices is due to a U.S. Department of Labor initiative targeting companies in the oil and gas industry that may be misclassifying workers as independent contractors or as exempt from overtime. The enforcement blitz, begun in 2012, yielded at least $4.5 million in back wages for 5,300 oil and gas industry workers, the department announced in December.

It’s a typical arc, said Rodney Bean, an attorney with Steptoe & Johnson in Morgantown: the Department of Labor identifies a potentially wide-spread problem within an industry, alerts those involved that it will be paying more attention to and, “then plaintiff attorneys go around doing their part.”

There are Youtube videos and LinkedIn offers soliciting plaintiffs for overtime lawsuits against oil and gas firms.

A Facebook post, written in capital letters, from January from the Weirton, W.Va law office of P. Zachary Stewart begins “Attention oil and gas workers: You may be owed money.” It has been shared 37 times with workers at companies such as National Oilwell Varco, Halliburton and Horizontal Wireline, highlighting that large, multinational corporations aren’t immune from these charges.

Nearly all such lawsuits are brought as collective actions, similar to a class action, ballooning the potential liability for companies.

In April, Texas-based ROC Water Services agreed to a $1.35 million settlement.

Mr. Bean, who represents companies, has been urging his clients to correct their pay practices to comply with the law. Some listen, he said, but “not as much as I would like to see.”

These kinds of lawsuits tend to be more common during a downturn, he said, as laid off employees look for recourse and are no longer afraid of losing their jobs by ruffling the company.  

A different kind of work

Just as Mr. Bean has yet to find a company that knew it was doing anything wrong by not paying overtime wages, so Joseph Chivers, a plaintiff’s attorney at the Downtown-based Employment Rights Group who has brought at least 15 such cases, has never met an employee who knew he/she was entitled to it at the onset.

“They don’t find out until after they’ve been working themselves to the bone,” he said.

“An average work week is 100 hours. That’s incredible. Compensation — a lot of them, if they’re being paid a salary — is $3,600 a month. When you take it all together and add it up, what would appear to be a very, very good job and high pay turns out to be not so high.”

The human toll is substantial as well, Mr. Chivers aid. Many oilfield workers spend weeks away from their families. They travel long distances and sleep in campers or tents.

“These are not normal work conditions. I think a lot of the guys getting into this, they don’t think it through,” he said. “I’ve never seen anything like it.”

Neither had Matt Cox. The Aliquippa native was working in retail in Texas when his cousin, who had a connection to the Texas-based Killion & Sons Well Services, hooked him up with a job as a night pumper in the Marcellus Shale play. It was his first oil and gas gig.

Mr. Cox worked 12-hour shifts, checking equipment at a dozen well sites each night between April and September 2014.

He earned $225 a day and worked, on average, 25 days a month. Mr. Cox claims the company created “bogus” time sheets with inflated work hours split into regular hourly wages and overtime in order to retrofit his actual pay into a payment schedule that appears to comply with the law.

Jeremy Killion, one of the company’s owners, said Mr. Cox was never paid a dayrate at all and had always been an hourly employee. This is the second overtime lawsuit brought against the company, he said. The first one cost the company $500,000. The company settled with Mr. Cox for more than he was owed in overtime, he said.

That ended Mr. Cox’s stint in the industry and he returned to retail.

This does not relate to any Payson Petroleum Lawsuit information, it is for informational purposes only.