Aug 27
Energy Cos. Brace For DOL Crackdown As Worker Deaths Rise

Energy Cos. Brace For DOL Crackdown As Worker Deaths Rise

NEW YORK – U.S. Labor Secretary Thomas Perez's recent vow to tackle a rise in oil and gas worker deaths is the latest sign that the Labor Department is stepping up its scrutiny of the booming industry, and it's a clear warning that energy companies should review their workplace policies and develop response plans now, before the agency knocks on their doors. 
The U.S. Department of Labor is already cracking down on wage-and-hour law violations within the oil and gas industry: For one, it said it's engaged in a multiyear wage-and-hour initiative targeting oil and gas companies operating in the Marcellus Shale in Pennsylvania and West Virginia.

Now the agency seems poised to crack down on workplace safety, in light of the 2012 workplace fatality statistics released by the Bureau of Labor Statistics last Thursday. While U.S. workplace fatalities decreased as a whole from 2011 to 2012, fatalities in the oil and gas extraction industry jumped 23 percent to 138 deaths in 2012, the highest total since the BLS began keeping track in 2003.

"Job gains in oil and gas and construction have come with more fatalities, and that is unacceptable," Perez said in a statement after the numbers were released. "Employers must take job hazards seriously and live up to their legal and moral obligation to send their workers home safe every single day."

Perez said the agency had partnered with energy companies on workplace safety initiatives, including the National Voluntary Stand Down of U.S. Onshore Oil and Gas Exploration and Production planned for Nov. 14, in which oil and gas companies voluntarily pause operations in order to conduct safety training and job site inspections.

However, experts say companies should brace themselves for some nonvoluntary interactions with the DOL in the form of more investigations and enforcement actions, many of which will be prompted by whistleblowing employees.

"Secretary Perez's recent statement highlights the fact that we'll expect higher scrutiny of the oil and gas industry for the foreseeable future," said Steve Shardonofsky, a Houston-based member of Seyfarth Shaw LLP's labor and employment practice group.

The U.S. shale boom has made the oil and gas sector one of the nation's fastest-growing job markets, but with companies under economic pressure to get employees to work in order to move ahead with exploration and production, basic safety training of these new hires can sometimes be neglected, experts say.

"In the oil fields of West Texas, you're drilling as fast as you can. They are 24-hour operations," said Darren Nicholson of Dallas trial law firm Sayles Werbner PC. "You're seeing the industry pushing the envelope — hiring a lot of new workers, not training them enough, not instituting safety standards enough — and as a result, you're seeing an increase in injuries and an increase in fatalities."

Further muddying the waters are the hundreds of energy companies that have sprung up in the wake of the shale boom, especially oil field services companies that contract with more established energy companies.

"When you have a smaller company or smaller operation, they have fewer resources to develop robust safety systems and protocols," Nicholson said. "There's not a big economic incentive to do that right now."

The DOL, however, may provide some regulatory incentive, experts say.

"The Department of Labor's eyes have become open to the fact that there are flagrant abuses in this industry," said Nick Woodfield, a principal at The Employment Law Group PC.

Shardonofsky says oil and gas companies have already seen more site visits byOccupational Safety and Health Administration inspectors, more investigations by the DOL's Wage and Hour Division, and more information sharing between the two departments.

"Employers should really have a plan in place to respond to OSHA or wage-and-hour site visits before the government shows up at your doorstep, [to] avoid a situation where your employees are essentially freelancing for the DOL," Shardonofsky said. "You want to automatically identify a point person that is going to interact with the government inspector and investigator and have a protocol in place to handle requests for information or interviews."

But staying in the DOL's good graces is more than just being cooperative when the agency comes calling. It's also about making sure your workplace policies can withstand agency scrutiny, especially when it comes to workplace safety, according to Quarles & Brady LLP partner Fred Gants.

"Employers who are mindful of this and have policies, practices and training in place are going to do better if something very unfortunate happens," Gants said. "The ones who don't, that's where OSHA lowers the boom."

For companies that contract out oil and gas work, it's also about ensuring both client and contractor are on the same page when it comes to policies that comply with workplace safety and wage-and-hour laws, experts say. A company might be able to escape private liability brought on by a contractor's lapses through indemnifications or other contractual provisions, but the DOL won't necessarily care about those provisions when it launches an OSHA or wage-and-hour enforcement action.

"When you invite a contractor to a work site ... there is the potential that the contractor and the client might be deemed to be joint employers for OSHA or wage-and-hour purposes, and in that case a violation by one employer may be imputed to the other alleged employer," Shardonofsky said.
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