The oil and gas industry is not immune to the staggering labor and employment issues caused by the global pandemic. This industry experienced nearly 200,000 job cuts, approximately 20% of the workforce. However, some predict the workforce will rebound to pre-pandemic levels by 2027. Despite this setback, the industry has recovered almost half of those 200,000 lost jobs, and sources anticipate employment will surpass pre-pandemic levels in the upcoming years. Skyrocketing oil, gas, and energy prices are significant growth factors behind increasing job openings in the industry. Although oil and gas companies are experiencing growth in hiring, inflation is impeding companies’ ability to increase wages.
The ebbs and flows of a changing workforce – whether caused by the pandemic, inflation, or rising oil prices – create a new breeding ground for employment law claims. Most recently, the industry has experienced an uptick in employment claims under the Fair Labor Standards Act (FLSA), resulting in increased levels of back wage recovery. In 2021, the U.S. Department of Labor’s (DOL) Wage and Hour Division reports that it recovered more than $230 million in back wages for workers. One of the most significant recoveries came from an industry-based company, with the DOL recovering more than $40M for misclassifying abstractors, title examiners, and landmen as independent contractors. The DOL also recovered close to $4M in overtime back wages for over 1,000 oilfield pipeline inspectors.
These misclassification issues continue into 2022 as the industry watches how, for instance, various circuits analyze whether oil and gas companies are correctly classifying high-earning employees as “exempt” under the FLSA. This could be an essential issue for the industry, as it may mean that employers must not only pay their employees’ high salaries, at or above $200,000 per year but also provide additional overtime compensation. While not exclusive to the oil and gas industry, there is also the concern of rising employment discrimination claims. The Equal Employment Opportunity Commission (EEOC) recently prevailed on claims for an employee who was discharged before he was scheduled to return from leave, allegedly because he suffered a heart attack while working aboard one of the drillships. Other generalized areas of concern are drug testing employees in safety-sensitive positions in the wake of marijuana legalization, wrongful termination, and OSHA violations.
Against this changing landscape, the oil and gas industry should more closely consider the benefits of alternative dispute resolution. More specifically, there are unique advantages to mediating employment claims in the oil and gas industry. Rather than opt for the zero-sum game approach of the formal adjudicative process, mediation allows parties to reach a collaborative settlement. And a settlement between private parties can usually be kept confidential – a vital consideration in some situations. Other unique benefits of mediation to a complex industry like oil and gas include:
- Cost. The parties could share the costs; and eliminate the high-priced ticket items associated with litigating a matter (i.e., motion practice, discovery, and trial).
- Time. When successful, mediation can significantly reduce the time devoted to an employment dispute. Parties are not waiting on the court’s availability; furthermore, participating in mediation may appear more favorable from a public perspective.
- Complexity. Parties may select a well-trained and impartial mediator versed in the issues facing the parties within this particular industry. The oil & gas industry is highly technical, lending itself better to a seasoned mediator or retired judge than a jury where parties have far less control over who will ultimately decide the case.
Mediation can also promote greater creativity in terms of resolution. However, the success of mediation also depends on the parties’ ability to compromise. Mediation often means that all interests are not fully satisfied since parties are expected to make concessions to resolve the dispute. Still, mediation is one of the few dispute resolution tools that keep the decision-making with the parties rather than handing it over to a judge, jury, or arbitrator. A neutral mediator will work with the parties to come to a resolution on their own.
In contrast, an arbitrator essentially serves as a judge who is responsible for resolving the dispute. While arbitration clauses are common in many employment agreements, the strength of enforcing such requirements is slowly being chipped away, more specifically in the context of sexual harassment claims. As employment-related claims rise within the oil and gas industry, it is beneficial to add mediation to your arsenal.
Tracey Holmes Donesky is a Labor, Employment & Benefits Partner at Stinson LLP. She works in the Minneapolis office. She may be reached at [email protected].
Allison Kruse is a Labor, Employment & Benefits Associate at Stinson LLP. She works in the Minneapolis office, and she may be reached at [email protected]