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Monday, July 15, 2024 | Back issues
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Oilfied Company Must Pay for Overtime Violations

(CN) - The American subsidiary of a Canadian oilfield services company willfully failed to pay its field employees overtime even after being advised to do so by its attorney, the 10th Circuit affirmed.

Eight employees for Pure Energy Services (USA) won an order for summary judgment in Wyoming District Court after a judge ruled that the company had willfully and unreasonably violated the Fair Labor Standards Act.

On appeal, the company's attorney said the trial court had erred in its ruling, arguing that the advice of its counsel was not fully flushed out or altogether accurate.

A new manager for Pure Energy had consulted with the lawyer after expressing concerns about the company's day-rate compensation policy. The company claimed it shouldn't be penalized because weekly overtime policies came up in that discussion as well.

If the incident did not rise to the level of being willful and unreasonable, the employees' lawsuit should have been dismissed under the standard two-year statute of limitations, Pure Energy claimed.

The Salt Lake City-based appellate rejected that theory on Feb. 22, noting that the company took no action despite being effectively put on notice.

"An employer may not selectively listen to and then, in good faith, rely upon only one of many issues discussed simply because it sought discrete legal advice on one potential FLSA violation and viewed all other advice as irrelevant to its original, limited inquiry," Judge Monroe McKay wrote for the court.

To fall under the expanded three-year statute of limitations, plaintiffs must show that "the employer either knew or showed reckless disregard for the matter of whether its conduct violated the statute."

"The thrust of Pure Energy's argument is that it should be allowed to both rely on and disregard advice of counsel in order to avoid a three-year statute of limitations and liquidated damages," McKay wrote.

"Although consultation with an attorney may help prove that an employer lacked willfulness, such a consultation is, by itself, insufficient to require a finding in favor of the employer," the ruling continues.

The 10th Circuit also affirmed the district court's award of liquidated damages.

Pure Energy began providing its services to U.S. gas and oil wells in 2004, and from the start its field employees worked 12-hour shifts, seven days a week, with one week off for every three weeks worked. The net result being that the employees worked approximately 84 hours per week.

During the events leading to the lawsuit, Pure Energy paid its field employees under a "day rate" compensation plan, whereby employees received a single daily payment regardless of the number of hours actually worked.

Pure Energy defined its "day rate" not by the Fair Labor Standards Act, but rather as a daily rate consisting of a defined regular rate for the first eight hours and an overtime rate for the remaining four hours of the day. For those employees paid in this fashion, Pure Energy did not keep track of either daily or weekly hours worked.

The District Court found this scheme violated the FLSA, which requires employers to compensate their employees "for a workweek longer than forty hours ... at a rate not less than one and one-half times the regular rate at which [the employee] is employed."

"Since its field employees' work schedules exceeded forty hours per week, Pure Energy should have paid overtime for all hours worked over forty," McKay wrote. "Instead, Pure Energy paid only what it believed was a day rate which included, by its calculations, four hours of overtime per day."

"Even by its own erroneous calculation, four hours of overtime per day falls well short of the FLSA-mandated overtime owed for all hours over forty where the employee works eighty-four hours each week," it continued.

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