There are currently approximately 125 active oil rigs currently operating in the Gulf. In the Greater New Orleans region, the oil and gas industry currently accounts for about 19,259 jobs with an average salary of $126,679. The energy sector employs a variety of workers, ranging from drillers and rig managers to accountants and attorneys — all of these are vital to Louisiana’s production of crude oil and natural gas.
When we think of lawsuits that affect oil and gas workers, we envision those that are triggered by disasters or workplace accidents. Costs can reach hundreds of millions or even billions of dollars.
There are a few ways oil and gas companies can manage risk and reduce litigation costs, such as adhering to safety improvements and following environmental protocols.
Another way to avoid litigation is to learn the rules of employee classification as it relates to overtime pay.
New Rule
The United States Fifth Circuit Court of Appeals recently determined that two drilling specialists, who work 12-hour shifts for weeks at a time, did not qualify for overtime compensation under the Fair Labor Standards Act (FLSA). The drilling specialists worked on location at well sites, monitoring the drilling operation to ensure safety and efficiency. At the end of their shift, the duo compiled and transferred oil well data.
The two drilling specialists sought overtime compensation from their oil and gas employer, which was denied. The employees responded by filing a lawsuit in federal court.
In general, the FLSA requires employers to provide overtime compensation to non-exempt employees working more than 40 hours per week. At first glance, these two specialists clearly qualify for overtime compensation. However, the FLSA carves out exceptions for employees working in a “bona fide executive, administrator, or professional capacity.”
The Fifth Circuit ruled that the two drilling specialists were highly compensated employees performing administrative duties and therefore excluded them from overtime pay. In doing so, the Fifth Circuit wrestled with a simple question whose answer affects all businesses in Louisiana, especially oil and gas. Who qualifies as an administrator?
Under the highly compensated employee exception, an employee classified as an administrator is exempt from overtime pay if the employee meets all three of the following elements: (1) The employee is compensated $684 per week; (2) The employee regularly performs the duty of an administrator; and (3) The employee’s primary duty involves office or non-manual work.
Most people would likely assume that any labor related to oil well performance falls outside of administrative duties, especially when that labor is performed on site.
The FLSA disagrees.
Section 541.200 of the FLSA provides a broad scope of administrative duties, including all “office or non-manual work directly related to the management or general business operations of the employer or employer’s customers.” Because the safety specialists’ primary duty was to monitor and transfer drilling performance data, the Fifth Circuit viewed the drilling specialists as advisors or consultants. In other words, they were classified as administrators. The ruling ignored the two specialists’ physical location, on an oil well, choosing instead to focus on the employees’ function within the drilling operation.
The ruling challenges traditional concepts of administrative work by expanding the scope of “office or non-manual work.” On its face, the two specialists have a strong argument for overtime compensation. They consistently work 12-hour shifts for weeks on end at the location of the oil well, which is normally offshore. Most office administrators work where their job title implies — at the office.
The Fifth Circuit’s broad interpretation of the FLSA may exempt new classes of employees who currently receive overtime benefits.
Both employers and employees engaged in the offshore energy sector should be aware of the Fifth Circuit’s interpretation of FLSA to ensure they are complying with federal compensation schemes. For employers, a proactive approach to classifying employees can prevent needless and costly litigation.
Gordon Hobson Rand is a third-year law student at Loyola University New Orleans College of law and serves as editor in chief of the Loyola Maritime Law Journal.
