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By Tim Garnett
Bounty hunters are glorified on many television shows. The legal community
has its own bounty hunters going after employers for unpaid wages and
overtime. There has been an explosion of wage and hour claims filed against
employers, alleging employees have not been paid for working off the clock
or that they are misclassified as “exempt employees” and should be paid
overtime.
The landslide of litigation can be blamed on lawyers like Mark Thierman,
formerly a management labor lawyer representing some of the largest
companies in the United States, who went to the “dark side” and started
representing employees. Thierman started a trend by bringing a series of
cases on behalf of workers in California alleging wage and hour violations.
Because wage and hour laws are antiquated and often ambiguous, attorneys
like Thierman have found a new legal goldmine.
This new goldmine has arisen in part because employees can sue companies
using a legal tool called “collective actions.” Simply put, a disgruntled
employee makes a claim for either unpaid overtime or for working off the
clock. The lawsuit expands by including other employees who claim they have
not been paid overtime or claim they worked off the clock.
Once two or more employees have similar claims, they can ask for their case
to be certified as a “collective action.” If successful, they can include
many other similarly situated co-workers, either at the same location or
across the country. Those employees then can opt in to the lawsuit and be
part of any judgment rendered. Unlike a class action, those employees who
choose not to opt in can pursue their own separate claims against the
company. For instance, Wal-Mart has had some 80 collective actions filed
against it and was ordered to pay over $240 million in just two lawsuits.
Three Areas To Watch
Lawyers looking to file collective actions look for three areas to attack:
employees asked to work off the clock; employees misclassified as exempt and
not paid overtime; and the more complicated, employees improperly docked in
their pay.
Working off the clock. Have you asked one of your hourly employees to answer
a phone call during their lunch period, or are they required to turn on the
lights at your facility before they clock in? These areas can cause
significant litigation for employers.
Employees who are classified as non-exempt (which means they must be paid
overtime when they work more than 40 hours in a week), should not be asked
to perform work-related tasks before they clock in. A similar problem arises
when those same employees perform work- related tasks while on their unpaid
breaks, such as lunch.
Misclassification of employees. The federal wage and hour law, the Fair
Labor Standards Act (FLSA), recognizes that certain classes of employees are
exempt from overtime. They are generally referred to as the “white-collar
exemptions,” such as supervisors, administrators, professionals, outside
sales and certain highly paid computer specialists. Virtually all of these
white-collar exemptions require the employee to use “independent judgment
and discretion.”
Unlike the late 1 930s, when FLSA was passed, the United States is no longer
an industrial nation, but rather a service nation. Think about it — there
were no computer programmers, mortgage brokers or call centers in the 1
930s.
Moreover, as companies implement standardized procedures, they want to take
away independent judgment and discretion. Lawyers representing employees
have skillfully used theses changes to their advantage and won millions of
dollars against employers.
Payroll docking. It is not uncommon for facilities that handle cash or do
their own food and beverage to dock employees’ pay in the event of cash
register shortages or breakage. Such policies can run afoul of the law if an
employee’s take- home pay falls below minimum wage or they are not paid
overtime for the week that the deduction is made.
The other troublesome area is where an exempt employee’s pay is docked.
Although federal law allows employers to deduct wages from exempt employees
when they are absent, there are many rules surrounding those deductions. If
an employer runs afoul and violates one of the rules, the exempt employee
could be reclassified as non-exempt after the fact, and the employer could
be responsible for paying unpaid overtime for the last two or three years.
An Ounce of Prevention
The Department of Labor, which is responsible for enforcing the Fair Labor
Standards Act, estimates that 70 percent of employers are non-compliant with
federal wage and hour laws. Most experts suggest that virtually every
employer runs afoul of the wage and hour laws at some point.
Exposure to this potential high liability area can be minimized by
evaluating your facility’s pay practices through a thorough audit. That
audit should include evaluating such things as working time, travel time,
docking policy, evaluation of all employees classified as exempt and
determining whether independent contractors are “truly independent.”
Hopefully, an ounce of prevention can keep the legal bounty hunters
away.
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Tim A. Garnett is managing shareholder at Ogletree Deakins.
You can reach him at tim.garnett@odnss.com.
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