Employment Issues Facing Energy Companies in 2021 and Beyond

Companies in the energy sector this past year faced unprecedented financial, economic and operational challenges, exacerbated by a once-in-a-century public health crisis. Falling energy prices, coupled with the economic downturn triggered by the COVID-19 pandemic, caused a significant labor contraction in the energy sector. The spread of COVID-19 required companies, including those involved in power generation, to focus on non-traditional health and safety mitigation strategies.


Moreover, regulatory changes imposed new restrictions on Employee Retirement Income Security Act (ERISA) plan fiduciaries in considering environmental, social, and governance (ESG) investments, potentially impacting overall investment levels in ESG. With the ringing in of 2021, energy companies, both private and publicly-traded, will face many of the same employment challenges faced in 2020, as well as new challenges in the form of various initiatives expected from the Biden administration.

Labor Contraction in the Energy Sector

As of early November 2020, there were 43 bankruptcies by energy companies, more than in any full year on record. Importantly, this number does account for the myriad out-of-court corporate restructurings that occurred. To avoid similar outcomes in the face of financially distressed conditions, companies continue to face the need to reduce general and administrative (G&A) costs. The go-to options in this regard include reducing wages or salaries; reducing benefits; and furloughing or terminating employees. Companies are considering how best to reduce costs while preserving jobs and caring for their people. For instance, companies can choose to maintain healthcare benefits during a period of furlough or to reduce executive and director compensation instead of impacting mid- and lower-level personnel.  Companies perceived to invest in their employees can realize stronger shareholder investment and support over the long-term.

Importantly, providing support for employees may require minimal, if any, net cost.  For example, expanding benefit options to include telemedicine options or mental health resources, like an employee assistance program, do not materially increase employee healthcare costs but can materially improve employee morale and health.

In making decisions about cost-saving measures (as well as hiring and retention), energy sector companies are encouraged to ensure policies and procedures do not have an adverse impact on a legally-protected class(es). More broadly, companies are considering how they can build a more diverse and inclusive workforce, particularly against the backdrop of the focus on social justice and racial equality. According to Department of Labor statistics, only 12% of workers in the oil sector are minorities, compared to 23% of the general U.S. workforce. Notably, a large U.S. trade association in the energy sector has made working with communities of color a priority and has announced its commitment to achieving greater diversity within the industry. In the current environment, the lack of either: recruiting and hiring initiatives aimed at diversifying the workforce, or focused efforts at increasing diversity and inclusion in the workplace will likely invite scrutiny from candidates for employment, employees and, perhaps, federal regulators, considering the Biden administration’s views on these issues.

Plan Ahead to Address Potential Union Organizing Efforts

The unprecedented challenges faced by companies in the energy sector cannot be understated. According to the U.S. Bureau of Labor Statistics, the oil and gas labor market alone shed approximately 100,000 jobs when compared with pre-COVID-19 levels.  In addition to making deep cuts to their workforce, companies continue to face financial strain as a result of decreased energy demand and measures taken in response to the pandemic. As a result, companies face the prospect of making significant pay cuts in order to further reduce G&A expenses to control their balance sheets.  Indeed, energy consulting firms estimate that wages in the energy sector may decline by 8% to 10% year over year from the beginning of 2020 to the beginning of 2021.

The combination of increased worker fears about workplace safety—principally driven by COVID-19—and decreased worker wages and benefits can create a fertile ground for the resurgence of worker activism and union organizing. Employees increasingly may express their concerns about such issues as safety of working conditions; wages or benefits; paid leave; and discipline or discharge of coworkers. In anticipation of increased union organizing activity (and other concerted activity by employees that may be “protected” under federal labor law even where an employer does not have a union), companies are encouraged to proactively and transparently address employee concerns, as well as seek legal counsel where appropriate.  Such steps may include evaluating employee compensation and benefits to determine if any (upward) adjustments can or should be made; communicating with employees regularly about workplace concerns; training managers and supervisors about union organizing campaigns and tactics and their rights and responsibilities under applicable law; and developing a plan to respond in the event of a petition for a union representation election.  Notably, any potential increase in worker activism will be met with what is widely anticipated to be a union-friendly Biden administration and National Labor Relations Board.

Health and Safety Requirements; COVID-19 Vaccine Issues

The U.S. Department of Labor and other federal, state and local administrative agencies have issued guidance materials regarding workplace safety in the face of COVID-19, including industry-specific guidance.  For example, the federal OSHA has issued COVID-19 Control and Prevention Guidance for Oil and Gas Industry Workers and Employers and the California Department of Public Health has issued COVID-19 Industry Guidance for Energy and Utility Industries. Generally speaking, because it is currently not possible to completely eliminate the hazard of COVID-19 from the workplace, companies are urged to utilize a hierarchy of controls (eg, engineering controls, administrative controls and personal protective equipment) in order to mitigate the risk of infection. As a reminder, all companies, including those in the energy sector, are required to comply with OSHA’s general duty clause – to provide a place of employment free from recognized hazards that are causing or are likely to cause death or serious physical harm.

Additionally, during his campaign, President-elect Biden urged President Trump to “immediately release and enforce an Emergency Temporary Standard to give employers and frontline employees specific, enforceable guidance on what to do to reduce the spread of COVID.” The Trump administration failed to enact a COVID-19 standard. In contrast, Biden, in close consultation with various constituencies, including unions, will likely push to develop a COVID-19 standard if the pandemic continues to impact worker safety in early 2021, particularly in light of the anticipated COVID-19 distribution schedule and overall vaccine-availability challenges.

Speaking of the COVID-19 vaccines, companies in the energy sector are encouraged, if not already under way, to consider whether to mandate or merely to encourage employees to receive a COVID-19 vaccine. Depending upon the particular course to be pursued, companies should generally consider the applicability, and impact, of legally-protected exemptions related to sincerely held religious beliefs and to medical conditions, as well as employees’ widely divergent attitudes toward the vaccines.

Furthermore, companies in the energy sector are urged to take note of OSHA’s increased scrutiny regarding COVID-19-related complaints.  As of December 2020, across all industries, OSHA and its state counterparts have (i) received a combined total of more than 55,000 complaints and referrals and (ii) opened a combined total of nearly 5,000 inspections (not including those that are related to an OSHA-announced program). According to OSHA citation-related data, citations have been issued related to the selection of respirators, medical evaluations, and fit testing, as well as recording-and-reporting violations, and even under the general duty clause for failure to follow applicable industry guidance on COVID-19-related precautions, such as social distancing.  Moreover, it is expected that such scrutiny will increase under a Biden DOL for several reasons.  First, before the presidential election, Biden called on Trump to significantly increase OSHA’s enforcement of COVID-19-related regulations and guidelines. Specifically, Biden signaled his desire to double the number of OSHA investigators to enforce the law and existing standards. Given his views on aggressive workplace safety enforcement, the Biden DOL will most likely to increase the number of investigators in OSHA and the Mine Safety Health and Administration.  Second, a review of the Obama-Biden DOL’s H1N1-related citation data, it is anticipated that the Biden administration will almost certainly begin issuing more general-duty clause citations if employers violate CDC guidelines for health and safety concerns related to the ongoing pandemic.

Accordingly, in addition to being vigilant regarding traditional workplace safety issues, energy companies are urged to continually monitor conditions and update their COVID-19 mitigation strategy.

What energy companies need to know about the Department of Labor’s position on permitting ERISA plan fiduciaries to consider environmental, social and governance (ESG) investments. The role of ESG investing in ERISA plans has shifted markedly when presidential Administrations change from one political party to another, with the only certainty being that the DOL’s position will inevitably reflect the attitude of the then-incumbent Secretary of Labor and his or her political bent.  And, the recent transition to a new presidential administration is no different.

In 2020, President Trump’s DOL promulgated a regulation that effectively limits the ability of a retirement plan to include sustainable investments.  As a result, plan fiduciaries considering investing on the basis of ESG are urged to consider the principles contained in the DOL’s proposed rule, including the following:

  • “Providing a secure retirement for American workers is the paramount, and eminently-worthy, ‘social’ goal of [retirement] plans; plan assets may not be enlisted in pursuit of other social or environmental objectives.”
  • “Given the increase in ESG investing, the Department is concerned that, without rulemaking, ESG investing will present a growing threat to fiduciary standards and, ultimately, to investment returns for plan participants and beneficiaries.”

The new rule imposes certain new investment duties, including those that require plan fiduciaries:

  • To evaluate investments “based solely on pecuniary factors that have a material effect on the return and risk of an investment based on appropriate investment horizons and the plan’s articulated funding and investment objectives”, and
  • Not to “subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to unrelated objectives, or sacrifice investment return or take on additional investment risk to promote goals unrelated to those financial interests of the plan’s participants and beneficiaries or the purposes of the plan.”

It is anticipated that the Biden administration DOL will attempt to reverse this “pecuniary factors” rule. Even if Republicans maintain control of the Senate, a newly-constituted DOL may utilize tools  such as the issuance of sub-regulatory guidance via a bulletin that might espouse more pro-ESG positions.

Upcoming Challenges in 2021 and Beyond

Effective November 2020, the SEC issued a new rule requiring public companies, regardless of sector, to disclose “any human capital measures or objectives that the company focuses on in managing the business.” The rule gives a non-exclusive list of possible items to be considered, including “measures or objectives that address the development, attraction, and retention of personnel.” Possible disclosure topics include: workforce demographics; hiring; training, promotions; retention; compensation; diversity and inclusion; safety; etc.  According to the SEC, such disclosures will require the provision of both qualitative and quantitative data that is aimed to help shareholders better understand their business.  Notably, this rule is in effect for proxy season 2021.

In an effort to ensure more racial and gender diversity on corporate boards, it is anticipated that the Biden administration will require publicly-traded companies, again regardless of sector, to disclose in their annual reports data on the racial and gender composition of their corporate boards. According to recent date, only 21 percent of S&P 500 board seats are held by racial minorities and only 27 percent are held by women.


Unquestionably 2020 tested the resiliency and mettle of companies across all sectors, particularly those in the energy sector.  However, weathering economic downturns and all other manner of challenges is the hallmark of energy companies.  Although employment challenges remain, energy companies will continue to rise to meet and overcome such challenges.

Michael W. Massiatte is of counsel, focused on labor and employment matters, and Marc D. Katz is a partner focused on labor and employment litigation with DLA Piper.