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In the "We Love Cheap Gas, But..." Department, Layoffs in the oil patch leading to increase in labor lawsuits

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 In the "We Love Cheap Gas, But..." Department, Layoffs in the oil patch leading to increase in labor lawsuits

Layoffs in the oil patch leading to increase in labor lawsuits

Spencer Platt/Getty Images

ANDREWS, TX - An oil pumpjack works at dawn in the Permian Basin oil field on Jan. 20, in the oil town of Andrews, Texas. Labor and employment lawyers say an uptick in lawsuits over back wages, age discrimination, unpaid overtime and the status of independent contractors directly tracks layoffs by oil and gas companies.
(Photo by Spencer Platt/Getty Images)

By NATALIE POSGATE natalie.posgate@texaslawbook.net

The Texas Lawbook

Published: 26 February 2016 04:52 PM

Updated: 29 February 2016 11:49 AM

Bankruptcy lawyers are not the only attorneys extra busy because of the oil and gas crisis. Lawyers specializing in labor and employment law have experienced a boon in business, too.

Lawsuits related to layoffs and job reductions in the oil patch have dramatically increased during the past 10 months.

Employment complaints filed in the Southern and Western districts of Texas hit all-time highs in 2015, according to new data compiled by Androvett Legal Media.

If filings during the first six weeks of this year are an indication, 2016 could shatter all records in Texas for lawsuits filed due to job reductions.

"Any time there is a termination of employment, there is a risk of litigation," said Ron Chapman, a shareholder in the Dallas office of the employment law firm Ogletree Deakins. "Given the layoffs in the industry, it's not a surprise that employment litigation has increased."

Chapman and other labor and employment lawyers say the uptick in lawsuits over back wages, age discrimination, unpaid overtime and the status of independent contractors directly tracks layoffs by oil and gas companies.

Complaints filed under the Fair Labor Standards Act in the Western District, which has jurisdiction over the major drilling towns in the Eagle Ford Shale and Permian Basin, nearly tripled from the first three months of 2015 to the second quarter and subsequent quarters. The increase during that same time period in the Southern District, which includes Houston, was 63 percent, the Androvett data shows.

There were 814 FLSA lawsuits filed in the Southern and Western districts in 2015, compared to 617 such cases a year earlier.

The number of employment cases filed in the Northern and Eastern districts actually declined in 2015, but legal experts say that is almost certain to change in 2016. In addition, Dallas lawyers are getting more than their fair share of the litigation filed in West Texas.

"I've never seen anything like this," says Allen Vaught, a lawyer at Baron & Budd in Dallas, who currently represents former oil and gas employees in 40 different cases. "I have cases in West Virginia, North Dakota, Colorado, California, New Mexico, Louisiana... all over."

No region has seen more action than the Southern District of Texas, which is headquartered in the nation's energy capital, Houston. The Androvett data reports that the Southern District saw a record-breaking 515 FLSA cases in 2015 -- an 85 percent increase from 2010.

The lawsuit data doesn't even tell the full story, as an increasing number of wage-and-hour disputes are conducted in private arbitration proceedings instead of court.

"There is a big amount of arbitration agreements out there," said Don Foty, a Houston lawyer who represents workers in wage-and-hour and collective action claims. "A lot of arbitration clauses are being forced on the employees."

Lawyers on both the employer and employee side say this layoff cycle is unlike any they have seen before, including during the Great Recession.

"This cycle will be deeper," said Paul Hash, who is the managing principal of the Dallas office of Jackson Lewis and an expert in wage-and-hour litigation.

"We're seeing a greater number of individuals affected by this downturn," said Shauna Johnson Clark, who leads the employment and labor practice at Norton Rose Fulbright in Houston. "Some companies are trying to limit the number of individuals affected by a reduction in force, but because the downturn has continued longer than expected, some companies are having to engage in another round of layoffs."

The growing use of independent contractors by oil and gas companies, especially those in the service sector, is a significant source of the litigation.

"Independent contractors are retained and hired for a particular unique expertise," Clark said. "It allows companies in service situations some flexibility with respect to planning."

Lawyers for workers contend that employers misclassify many employees as independent contractors as a means to avoid basic employment laws in order to save money.

"It's a pretty pervasive issue in the oilfield," said Vaught, who currently represents workers in lawsuits against EOG Resources, Chesapeake Energy and Marathon Oil. "When they're labeled as contractors, they get no overtime, no benefits, no health insurance, no social security and no FICA taxes. And the government is getting less tax revenue than it would."

Lawyers say they also have seen an increase in litigation under the Workers Adjustment and Retraining Act (WARN), a 1988 law that requires an employer of 100 or more workers to provide employees a 60-day notice of mass layoffs or plant closures so they have ample time to search for other jobs.

Vaught said he had a client who drove from Tennessee to North Dakota to do fracking work in the Bakken Shale for two-week periods. When financial situations became dire after oil prices dropped, the company told the man he was getting laid off, but not until he had made the 1,300-plus mile drive to North Dakota.

"When people are treated that way, they're more eager to try to do something about it," Vaught said.

The number of age discrimination lawsuits involving laid off energy workers is also on the rise, according to some legal experts who represent workers and employers.

"The energy folks have been and will continue to lay off in bulk, somewhat reducing liability exposure, whereas those employed in the other industries may feel they've been unjustly selected for termination when the layoffs are few in number," said Nick Spiliotis, a partner in Jackson Walker's Houston office.

Spiliotis, who represents businesses, said the "ripple effect" is already occurring as the downturn in the oil and gas sector spreads to non-energy companies. He has seen a jump in employment litigation against construction and hospitality businesses that have significant operations in communities where oil and gas is a major employer.

"If you go down anywhere between Houston and Corpus Christi, the boom revitalized a lot of these towns," he said. "You're going to start to see those towns hurt pretty bad."

 

 

 

 

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