On this Blawg, we’ve talked about overtime law and the risks of overtime litigation before (see links below).

Nothing has changed, but the trend of increased litigation and expensive settlements in this area of employment law continues. As big overtime settlements draw attention from lawyers and employees alike, expect this trend to continue its acceleration.

More than ever, employers are well advised to engage in systematically reviewing, or “auditing,” the classification of employees for overtime purposes.

Related issues should also be carefully evaluated, including state-law compliance, proper wage and hour recordkeeping, and maintaining the salaried status of overtime-exempt employees by avoiding improper deductions from pay.

This issue came to mind again when I read an excellent article on overtime litigation in Business Week.

This article on overtime lawsuits, excerpted below, covers the basic practical and legal problems for employers, the impact of the changing workforce and workplace on overtime issues, and the legal industry developments (large class action settlements and corresponding fees) driving the continuing growth of overtime litigation.

The Problem

Because wage and hour laws have been so widely violated, undetonated legal mines remain buried in countless companies, according to defense and plaintiffs’ lawyers alike.

No one tracks precise figures, but lawyers on both sides estimate that over the last few years companies have collectively paid out more than $1 billion annually to resolve these claims, which are usually brought on behalf of large groups of employees.

What’s more, companies can get hit again and again with suits on behalf of different groups of workers or for alleged violations of different provisions of a complex tapestry of laws.

Changing Workforce and Workplace

In overtime cases, Depression-era laws aimed at factories and textile mills are being applied in a 21st century economy, raising fundamental questions about the rules of the modern workplace.

As the country has shifted from manufacturing to services, for example, which employees deserve the protections these laws offer? Generally, workers with jobs that require independent judgment have not been entitled to overtime pay. But with businesses embracing efficiency and quality-control initiatives, more and more tasks, even in offices, are becoming standardized, tightly choreographed routines. That’s just one of several factors blurring the traditional blue-collar/white-collar divide.

Then there’s technology: In an always-on, telecommuting world, when does the workday begin and end? The ambiguity now surrounding these questions is tripping up companies and enriching lawyers. . . .

Under “white-collar exemptions” to the law, employers don’t have to pay [overtime] to various executives and professionals. These exemptions, labor historians say, are rooted in decades-old thinking about a workforce that bears little resemblance to today’s.

A clear distinction between professional and production classes used to be assumed. Nowadays mortgage brokers, for instance, crank out loan applications in assembly line operations and are paid based on how much they produce. Lenders around the country have battled, largely unsuccessfully, to defeat overtime claims by these employees.

Six-Figure White-Collar Proletariat?

The Business Week piece profiles a leading overtime attorney whose biggest recent settlements have been on behalf of stockbrokers, many of whom earn well into the six figures. He’s now moving on to computer workers, pharmaceutical sales reps, and accounting firm staff.

Lawyers beware: law firm staff, especially salaried paralegals, may also be fertile ground for such suits.

As this millionaire attorney sees it, “these are the rank and file of a white-collar proletariat.”

Two Claim Categories

There are two basic categories of overtime claims. One arises because a company has misclassified employees as exempt from the wage and hour laws, and thus improperly failed to pay overtime. In some of these cases the workers have been classified as independent contractors, meaning the company doesn’t pay them benefits, either.

The second is a so-called off-the-clock claim, in which employees allege that some of the work they do is not recorded by the company, sometimes as an intentional way to keep them from accruing overtime.

Role of Legal Profession

While violations appear widespread, employees themselves rarely think to make wage and hour claims. Instead, they usually have it suggested to them by lawyers. “Ninety-five percent of our wage and hour cases are a result of someone coming to us complaining about something else,” says [a quoted attorney]. “I can’t tell you how many people have come into our office with employment disputes that are meritless and would be thrown out of court and walk out with an FLSA [Fair Labor Standards Act] claim.” . . .

Management-side attorneys . . . are certainly cashing in on the wage and hour lawsuit boom. But they can only look with astonishment and envy at what plaintiffs’ attorneys are now making in this area.

[The profiled attorney] says his recent settlements alone total $458 million. Attorneys fees are about 25% of that, and [he] usually splits his take with various co-counsel on each case. While he won’t say how much he’s due to receive from these cases (and courts must still approve the fees in some of them), he doesn’t dispute that it’s in the low tens of millions.

Becoming a multimillionaire by getting money for people who didn’t even realize they were arguably “entitled” to it — and in most cases took the jobs and accepted the pay rates knowing they would work long hours without overtime pay . . . . Is this a great country or what?

Related Posts

• Overtime Litigation Booming Since New Rules Became Effective



• Think You Understand Overtime Laws? Try This Quiz To See!



• The New Overtime Pay Laws: Test Your Knowledge of Part-timers and Suspensions!



• The New Overtime Pay Regs: What Are Employees Asking?



• Multi-Million Dollar Overtime Compensation Settlement

Photo credit: platinum via flickr

Related Posts

George Lenard on Compensation, Employment Law, General, Human Resources, Overtime

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