Bloomberg News

Worker Wage-and-Hour Suits Rise in Difficult Labor Market

August 15, 2012

Lawsuits by U.S. workers contesting wages and hours, including demands for overtime pay, reached a 20-year high this year as unemployment remained above 8 percent.

There were 7,064 federal wage-and-hour cases filed during the 12 months ending March 31, a number that has grown almost every year since 2000, when the total was 1,854, according to the Administrative Office of the U.S. Courts, which plans to release the data publicly later this year.

The recession and the unemployment rate contributed to the rise, said Richard Alfred, chairman of the national wage and hour litigation practice at Seyfarth Shaw LLP, who represents companies in lawsuits brought by groups of workers. His firm reported the 2012 data in July.

“When employees are laid off, that may be an opportunity for them to seek legal counsel either to see if there’s any basis for contesting their termination or to make sure that what they’re receiving in severance or other benefits is proper,” Alfred said in a telephone interview.

Jason Rozger, a partner at Beranbaum Menken LLP in New York, which represents employees, said high unemployment gives companies leverage to compel work off the clock because people are worried about losing their jobs. That changes once they get fired, he said.

“As unemployment goes up, people get laid off and they’re no longer worried about retaliation,” Rozger said in a phone interview.

Fired Workers

Attorneys for terminated employees seeking advice may be prompted to look into wage-and-hour lawsuits, Alfred said.

“I don’t suggest these cases are brought in such a cavalier way, but they’re complicated,” he said.

Different courts have reached different conclusions on the same questions, such as which employees are entitled to overtime pay, he said.

Ambiguities in the Fair Labor Standards Act, which establishes standards for overtime pay, also contribute to the volume of cases, the lawyers said. The law, enacted in 1938 and amended in 2004, defines which workers are entitled to extra pay for working more than 40 hours a week.

It exempts executive, professional and outside sales workers, among others, laying down rules for each category. Someone exempted as an administrator, for example, must do office or “non-manual” work related to “the management or general business operations” of the company.

The worker’s primary duty must include “the exercise of discretion and independent judgment with respect to matters of significance.”

Programmer Exemption

Computer programmers, defined as those who analyze and design computer systems, are exempt from the overtime requirement. Some employers try to classify workers performing rote computer tasks under the exception, Rozger said.

“The fact that you’re using a computer doesn’t mean you’re not entitled to overtime,” he said.

Alfred said the labor law is outdated.

“It is complicated, confusing, difficult for employers to apply laws that were written and adopted in a very different industrial setting to today’s far more technological workplace,” Alfred said. “Proper application of the exemption depends on many unclear concepts -- concepts that can be interpreted differently by very well-intentioned people.”

Lawsuits arise over which workers exercise “discretion and independent judgment.” In one such case, information technology workers at Amdocs Inc., a software company, sued for overtime pay in federal court in San Francisco in September 2010.

Trouble-Shooters

The employees claimed they “primarily performed non-exempt duties including providing computer support, trouble shooting, testing related to repairs and problem-solving and/or other technical services,” according to a December 2011 court order certifying the case as a class action, or group lawsuit.

“Plaintiffs have submitted evidence showing that they used procedures and manuals to perform their jobs, and that they did not have the discretion to deviate from prescribed guidelines,” U.S. District Judge Susan Illston wrote.

She said the question of whether the employees’ primary duty “includes the exercise of discretion and independent judgment” should go to trial. The case is pending.

Amdocs argued in a court filing that the workers “fall squarely within this exemption from minimum wage and overtime.” While arguing that the plaintiffs fell within the computer- programmer exception, Amdocs said they would be exempt under other provisions of the law anyway.

Class Size

Amdocs told the court the class as certified might include more than 700 people.

Similar issues arose in cases filed last year against Wells Fargo & Co. (WFC:US) by home-mortgage consultants. The consultants were paid commissions and didn’t get overtime. They sued Wells Fargo and the Wachovia Mortgage Corp. unit it acquired in 2008, alleging the companies misclassified them and owed them overtime pay. A judge in Houston certified two classes on Aug. 10.

Wells Fargo said in a court filing that it changed its classification system because of “legislative and regulatory changes affecting the industry” and “to remain competitive with other mortgage lenders.”

The San Francisco-based bank estimated the proposed class would include 21,000 people.

Alfred said cases have also turned on disputes over tracking hours for employees who can work from home or who spend five minutes on a work-related phone call while technically off the clock.

Independent Contractors

The use of independent contractors has prompted legal actions ranging from mass litigation on behalf of FedEx Ground drivers, now before a federal appeals court in Chicago, to individual disputes.

A U.S. Labor Department-commissioned study in 2000 found that 10 percent to 30 percent of companies in nine states misclassified workers.

Sometimes growth leads to violations because a company is unprepared to handle employee classification, said Jahan Sagafi, a partner with Lieff Cabraser Heimann & Bernstein LLP, in San Francisco, which represents plaintiffs.

Growing companies should be careful to get “adequate HR protections” in place to comply with the law, Sagafi said.

Greater awareness of the law is fueling the litigation, the three lawyers said.

As Congress debated Fair Labor Standards Act amendments in 2003, filings under the law almost doubled, to 4,055 from 2,035 in 2002, according to the Federal Judicial Center, the research arm of the federal courts.

Sagafi said he has worked on cases involving information technology workers and the computer-professional exemption. He said he has also seen cases in the drug and retail industries.

Alfred cited retailing as a frequent source of wage-and- hour litigation, along with hospitals and hospitality.

“The fact that they continue to be brought in record numbers is something that corporate America is paying attention to,” he said.

To contact the reporter on this story: Emily Grannis in New York at egrannis@bloomberg.net.

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net.


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