Suits In The WorkPlace : FLSA

Friday the 13th

Rod Satterwhite — Mon, 16 Oct 2006 16:53:00 GMT

Friday the 13^th proved to be quite unlucky for Wal-Mart. Last Friday, a state court jury in Philadelphia awarded nearly $78 million in damages to a class of current and former Pennsylvania employees of Wal-Mart Stores Inc. (Braun v. Wal-Mart Stores Inc., No 020303127, damages award 10/13/06). The damages award came just one day after a jury verdict finding Wal-Mart, Pennsylvania’s largest private employer, had violated state wage and break laws by failing to pay employees during rest breaks and for work they did off the clock. The employees are expected to seek an additional $62 million in liquidated damages for willfully violating state law. According to one former employee, the workers were expected to do “whatever it takes to get done, and if that meant missing your break, that’s what had to be done.” Wal-Mart issued a statement on Friday indicating that it intends to appeal the jury award. The Pennsylvania verdict comes less than one year after a California jury ordered Wal-Mart to pay $172 million to a class of California employees for violation of state meal break laws.

Take-away: It's easy to see how a manager's efforts to motivate employees could quickly become Exhibit A in a case like this. These days, every successful business is customer-focused in one way or another, and encourages its employees to adopt that same "whatever it takes" attitude. Employers should be careful, however, to monitor (or at least spot-check) what's being said to employees -- in training sessions and in the work environment. Supervisors must be educated to temper their "motivational" comments so they aren't later misconstrued as an instruction to work off the clock. On wage and hour issues, an ounce of prevention can literally be worth $78 million of cure.

Going Into Overtime on Overtime

Rod Satterwhite — Thu, 27 Apr 2006 18:52:00 GMT

Here's one that hopefully won't impact the release of Madden 2006: In its second such case in less than a year, Electronic Arts, Inc. this week agreed to settle a class action overtime dispute with a group of computer programmers. The current and former employee plaintiffs alleged that the gaming industry juggernaut misclassified them as exempt employees to satisfy California overtime laws and avoid paying overtime. The class argued that, because they neither had creative control nor management responsibility, they were not exempt. Maintaining its compliance with the law, EA agreed to pay $14.9 million to the class to settle. This settlement comes on the heels of a similar one from last October, where EA agreed to pay $15.6 million to a class of graphic artists.

Losing Neverland

Rod Satterwhite — Tue, 14 Mar 2006 18:15:00 GMT

We've talked about the potential problems with wage and hour issues in California for quite a while. But this takes the cake. In a stunning flex of governmental enforcement muscle, the California Department of Industrial Relations has issued a Stop Order and a $69,000 penalty against Michael Jackson for not providing workers compensation coverage for his employees at Neverland Ranch. (Hat tip to the ever-vigilant folks at The Smoking Gun for posting copies of the actual notices.) The singer also received notice that he had failed, since December 19, 2005, to pay wages to over 30 employees at the facility. According to the notice, he has until today, March 14, 2006, to make the more than $300,000 in payments, or "DLSE will pursue appropriate legal action against you on behalf of the People of the State of California to recover the wages due and penalties under the Labor Code." Who's bad now?

California employment law can be tricky, especially when it comes to matters like paying wages to terminated employees, paying for accrued but unused vacation time, and coordinating leave issues under California leave laws. It's especially important for non-California employers to get a handle on these laws if they have facilities or even a few employees within the state, because many of these requirements have no minimum employee coverage limits.

Even so, am I the only one enjoying watching the Neverland saga unfold? Didn't they eventually get Al Capone on tax evasion charges?

Back Wages Collected by DOL Hit 4-year Low

Rod Satterwhite — Tue, 07 Feb 2006 21:10:00 GMT

Initially, we apologize for the delay in posting. We were following the advice in our last post and trying to see how much we could leverage our sick leave.

On to the topic du jour. The Department of Labor’s Wage and Hour Division collected more than $166 million in back wages in fiscal year 2005, marking a four-year low. Could it be that many employers are beginning to hear the cry of employment lawyers and HR consultants? Is there an increased recognition of the financial risk involved in not complying with highly complex labor laws such as the Fair Labor Standards Act and the Family and Medical Leave Act? Or is it mere coincidence – a random twist of fate? Well let’s see.

Overall, the DOL collected back wages for 241,379 employees in FY 2005, which represents a 30 percent decrease from the DOL’s peak of 342, 358 in FY 2003 and it is the lowest number since 2001. The DOL however, claims that its effort to collect back wages in the last year has not waned. In fact, wages collected on behalf of low-wage workers has increased to a record high of 45.8 million in back pay for 96,511 low-wage workers during FY 2005. What's more, the amount collected in low-wage industries such as day care, restaurants, and temporary help increased by 13 percent over figures from 2004. Well critics may differ, but for those of us who wake up in the morning wondering, “does X employee perform the requisite number of job activities directly related to management or the general business operations to qualify as exempt employees under the FLSA and corresponding state statues?” the answer is clear. Increased awareness and attention, preventative “simulated” audits, and perhaps a mortal fear of collective actions in California have guided an increasing number of employers toward safe shores.

In this area, however, the work is never done. Thus, while numbers for 2005 have decreased, employers still need to focus on a number of areas for improvement. Notably, the largest awards were for violations of the FLSA’s overtime rules. In FY 2005, 188,954 employees received back wages totaling over $119 million dollars for unpaid overtime. This amount represented 89 percent of all wages collected under the FLSA. Of the back pay collected under the FLSA, the DOL reports that nearly $14.7 million was collected for roughly 11,000 employees as result of violations based on the 2004 changes to the overtime rules. An additional 21.4 million in back wages were collected for employees who were paid straight-time instead of overtime and 20.1 million was collected for workers who were not paid for all hours worked.

So, despite the trend, complacency is not an option. Unless you like jury trials in California.

No Free Lunch for Wal-Mart

Rod Satterwhite — Tue, 03 Jan 2006 19:55:00 GMT

Let's keep going with this California trend. Just before Christmas, a California jury put a lump of coal in Wal-Mart’s stocking. After deliberating for three days, the jury determined that Wal-Mart had violated a state law that mandates a 30-minute unpaid meal break for employees. As a result, Wal-Mart owes class members roughly $57 million for missed meal period and a staggering $115 million in punitive damages. The award of punitive damages may have been driven in part by company documents which appeared to indicate that Wal-Mart executives were not entirely unaware that employees were not taking mandatory meal breaks. Wal-Mart has appealed the verdict, including the appropriateness of punitive damages. Meanwhile, the world’s largest retailer faces similar class actions for meal violations in over 30 states.

Lesson 1: Employers need to make sure that their operations comply with meal break laws, especially if they do business in different states with different requirements. If they don’t, what would otherwise have been a free lunch could become pretty costly.

Lesson 2: Don't go to trial 3 days before Christmas.

Savaglio v. Wal-Mart Inc., Cal. Super. Ct., No. C-835687, verdict 12/22/05.

Bringing Home the Bacon

Rod Satterwhite — Wed, 02 Nov 2005 12:58:00 GMT

After intense lobbying by pro-labor House Republicans, President Bush's Administration has decided to reinstate the prevailing wage provisions of the Davis-Bacon Act to the Gulf Coast Region. Labor Secretary Elaine Chao said late last week that the rule mandating local prevailing wages on projects over $2000 would come back into force effective November 8th. President Bush had suspended the rule in wake of Hurricane Katrina, based on a provision that allows the President to do so in the event of "national emergency." The suspension turned into a political hot button, often "confused" by the media as a suspension of minimum wage, which did not occur. Construction groups oppose the move to bring back the rule, saying it will impede the rebuilding process at a time when so much needs to be done to get the region back on its feet. Labor groups praised the move, countering that the people who got hurt when the rule went away were the workers actually doing the rebuilding. One thing is for sure: the move preempted what would have been a derisive fight in Congress over proposed resolution to bring prevailing wages back. And maybe one less derisive fight maybe isn't such a bad consequence. I seem to recall something about choosing battles wisely . . . .

Justice Roberts Jumps in with Both Feet

Rod Satterwhite — Thu, 06 Oct 2005 13:38:00 GMT

Newly sworn in Chief Justice John Roberts heard his first arguments this week, including a case dealing with the FLSA. There is currently a circuit split over whether or not the time spent donning and doffing protective gear is compensable under the FLSA. The 1st Circuit, in Tum v. Barber Foods, 360 F.3d 274 (2004), held that it was not, but the 9th Circuit, in Alvarez v. IBP Inc., 339 F.3d 894 (2003), held that it was. The question hinges in part on whether the activity at issue is "integral and indispensable" to the actual work involved, under the US Supreme Court holding in Steiner v. Mitchell, 350 US 247 (1956). The Chief Justice questioned counsel on the issue's interplay with existing regulations on the compensability of walking between workstations and waiting in lines, as well as the relationship between "integral and indispensable" activities and "primary activities" cited as compensable in federal regulations. Nothing like a little heated debate for your first day on the job.