Government Contracts Monitor

Short Take: Shell Oil and Motiva Enterprises Pay Nearly $4.5M in Overtime Back Wages for Fair Labor Standards Act Violations

October 14, 2014

The U.S. Department of Labor (DOL) Wage and Hour Division (WHD) recently announced that Shell Oil Co. (Shell) and Motiva Enterprises LLC, which is partially owned by Shell and markets Shell gasoline and other products, have agreed to pay nearly $4.5 Million in overtime back wages to 2,677 current and former chemical and refinery employees. (DOL Press Rel. No. 14-1645-DAL, dated 09/16/14.) WHD investigations at eight refineries in five states found that the companies failed to record as time worked, and pay the employees for, time spent attending mandatory pre-shift meetings.

While these violations do not appear to have involved government contracts, the underlying rules and principles apply equally to government contracts and are explicitly carried forward in the Service Contract Act (SCA) applicable to government service contracts. See 29 C.F.R. § 4.178 (“Determinations of hours worked [under the SCA] will be made in accordance with the principles applied under the [FLSA]”). Moreover, under the SCA’s strict liability provisions, such violations, can result in mandatory debarment unless unusual circumstances are determined to exist.

In addition, under Executive Order 13673 (79 Fed. Reg. 45309, 8/5/14), if such violations are determined in an administrative merits determination or civil judgment, they would have to be reported in connection with bids or proposals, starting in 2016, and would have to be considered by the Government in determining a prospective awardee’s responsibility.

It therefore is extremely important, for these and other reasons, that government contractors understand the applicable rules and properly record and pay for all hours worked under government contracts. See generally 29 C.F.R. Part 785, setting forth DOL’s regulations discussing “Hours Worked.”