- Associated Press - Wednesday, December 10, 2014

CHARLESTON, W.Va. (AP) - Natural gas drilling contractors working in the Marcellus Shale have agreed to pay nearly $4.5 million in back pay to 5,310 workers in Pennsylvania and West Virginia after an investigation that found violations of the federal Fair Labor Standards Act, federal officials said.

A majority of the violations involved improper payment of overtime. Some salaried employees did not receive an overtime premium because they were misclassified as exempt from the law’s overtime provisions, the U.S. Department of Labor said Tuesday in a news release.

In other cases, production bonuses were not factored in to determine employees’ overtime pay rate, as required by the law.

Labor officials said the industry’s structure is partly responsible for the violations.

“The oil and gas industry is one of the most fissured industries. 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,” David Weil, administrator of the Wage and Hour Division, said in the release. “Given the fissured landscape, this is an industry ripe for noncompliance.”

The mineral rights are owned by large companies that identify extraction sites and develop wells. Subcontractors are then brought in to do a majority of the work at the site. These companies include drilling and geological services, land leasing and acquisition service, and oilfield support services companies.

Welding, pipeline maintenance and other specialized and ancillary support services often are provided by secondary subcontractors.

“The more fractured an industry is, the more likely there will be significant labor law violations,” Mark Watson, the Wage and Hour Division’s Northeast regional administrator, said in the release. “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 Wage and Hour Division conducted the investigation from 2012 to 2014 as part of an ongoing enforcement initiative. The initiative is now looking at potential violations in other parts of the country, the Department of Labor said.

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