We are all happy with the falling gasoline prices we have experienced, but, as lawyers, we (seemingly) always look for the dark spot in the sky. Some commentators are positing that the sharp drop in oil prices may trigger an increase in Fair Labor Standards Act suits against employers in the energy sector, as involuntarily separated workers seek out lawyers who look for weaknesses in employer compensation procedures, such as dubious classifications of workers as exempt or independent contractors. In fact, I recently posted on just such a misclassification lawsuit in this industry (won by the plaintiffs).
Factors possibly impelling this increase are the rather lenient standard for securing conditional collective action certification in FLSA cases and the widespread use of independent contractors by oil companies. From numerous experiences, I can safely say that the issue of who is and who is not an independent contractor is often a murky question and the term “consultant” is used a little too loosely.
The use of independent contractors is more pervasive in the energy space industry, as opposed to other industries, according to Becky Baker, of Houston’s Bracewell & Giuliani. She opines that oil companies rely “heavily on a contract workforce in the field.” Although using independent contractors is certainly lawful, the issue of whether such workers are actually employees is extremely fact sensitive and the law is generally tilted (in any State) in favor of finding people to be employees.
Starting a FLSA lawsuit is easier for plaintiff side attorneys because many of them now use a detailed intake questionnaire, which probes not only “standard” type discrimination issues but also ferrets out the manner and mode of payment of the potential client, whether they receive overtime and whether they are in fact classified as independent contractors. If the person answers that they do not receive overtime, then a whole line of inquiry opens, with now a new focus on FLSA type issues.
Perhaps the larger energy companies, which may have already been sued on classification issues (exemption and independent contractor status) may be well positioned to defend such new cases, but there will be many opportunities for plaintiff lawyers to go after small and mid-size employers. Although lower/falling oil prices may not be good for all kinds of employment cases, wage-hour suits specifically are a genre of cases that may have legs. This is because, unlike many discrimination lawsuits, which must first begin with the filing of a Charge before the Equal Employment Opportunity Commission, FLSA plaintiffs do not have to go through this procedural hurdle, as they would for a Title VII claim.
Further, although an employer can ultimately seek to decertify a FLSA collective action, there is only a modest burden placed on plaintiffs to secure conditional certification, which then triggers the sending of notices to all putative plaintiffs, which then raises the stakes geometrically. Also, is extraordinarily expensive to defend such actions and the fee shifting nature of the FLSA further multiplies the fees at issue.
So, fill up and let’s ride…