NEW ORLEANS — The Fifth Circuit Court of Appeals assessed large monetary sanctions against DOL in an overtime suit that the agency brought against Gate Guard Services, a company that contracts with oil companies to provide gate attendants for remote drilling sites, for violations of the Fair Labor Standards Act (FLSA). The attendants apparently remain at the sites and have the job of recording the license plates of vehicles that enter and leave the oil fields. Many of these attendants live on-site because their locations are isolated, and the company hires technicians to deliver supplies for the attendants. Gate Guard considers the attendants to be independent contractors.
Flawed Investigation
After receiving a complaint from a Gate Guard attendant, the Department of Labor initiated an investigation which the court found to have violated DOL’s internal procedures and ethical litigation practices. The DOL apparently allowed an untrained investigator to conduct the investigation, and the investigator deliberately shredded his notes thus impeding the company’s ability to defend itself. The investigator then surprised a low-level Gate Guard employee with an interview when he knew that the company’s attorneys would not be present and came to a conclusion after interviewing just three witnesses. Finally, the investigator inflated his damages calculations by approximately $4 million and broke protocol in presenting his findings. Based on this investigation, DOL concluded that the company misclassified 400 attendants as independent contractors rather than employees and ordered it to pay $6.19 million in back wages, which included overtime payments, accumulated from July 2008.
Uncivil and Costly Litigation Tactics
According to the court’s opinion, the DOL hoped to prevail in the case by oppressively pursuing a very weak case. The DOL apparently opposed Gate Guard’s reasonable and customary motions and refused to produce witness statements during discovery even in redacted form despite submitting portions of those statements to the court as evidence. The DOL also apparently harassed gate attendants for more information and obstructed the investigator’s deposition so much that it had to be stopped. This conduct left Gate Guard at an unfair disadvantage and left the company with no means of assessing its risk or evaluating settlement potential.
Therefore, the court found that the DOL’s position in the case was frivolous and should have abandoned the litigation. It awarded attorney’s fees against the government. The DOL eventually settled the case for $1.5 million.
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