Discrimination Suits Out; Overtime Suits In.

High unemployment rates and a still-slumping economy are pushing disgruntled employees to file a record number of lawsuits alleging that they were improperly compensated by their employers.

The most common claim is for overtime pay. That’s a departure from the majority of fair-labor claims made by employees in years past.

“Ten years ago, when management-side employment attorneys discussed workplace lawsuits, we talked about discrimination based on sex, race, age, disability or religion. Today, it’s all about wage and hour lawsuits,” said Glen Doherty, a partner at McNamee Lochner Titus & Williams    , a law firm based in Albany.

The U.S. Department of Labor    reports that 70 percent of employers are in violation of the Fair Labor Standards Act. The legislation, enacted by Congress in 1938, establishes minimum wage, overtime requirements and record-keeping standards for employers.

For all federal courts nationwide, there were 6,785 cases in 2010, up from 5,023 in 2008. That’s quadruple the number of cases filed a decade ago.

In New York, the Department of Labor’s Wage and Hour Division received 40,000 complaints in 2010, a 15 percent jump from 2009.

Most of the claims stem from allegations that the employee was misclassified as “exempt” from overtime provisions. The majority are filed as class-action or collective-action lawsuits.

Doherty, who represents employers, gives two reasons for the surge in wage claims: One, laid-off workers who remain out of work are looking for unpaid overtime. And two, publicity about successful wage-and-hour litigation is spurring on more lawsuits.

John Higgins is a partner with Nixon Peabody    in Albany. Higgins, whose main practice area also is representing employers in labor and employment law issues, expects the spike in wage claims to continue through at least 2012.

“Without question, there’s been an explosion of all types of employee litigation and workplace claims during the recession. By far, the biggest increase and the biggest nightmare is wage-and-hour litigation,” he said.

State and federal employment laws regarding employee classification are complicated, and the line that separates exempt employees from non-exempt employees isn’t always clear, Higgins said.

“There are a lot of gray areas,” he said.

For example, employers sometimes confuse “salaried” with “exempt.” There is a distinct difference.

A specific set of standards put in place by the Department of Labor must be met before a person is exempt from overtime pay.

The law outlines three major exemptions: executives, where a worker has supervisory authority over employees; administrators, where a worker has the authority to make business decisions; and a learned or creative professional exemption.

Another common mistake employers make is considering an employee’s job description as the only basis of determining whether an employee is exempt or non-exempt. Unless the job description—and the work the employee is performing—fall within the exemption, the employee is non-exempt and therefore entitled to overtime. Overtime is generally defined as time-and-a-half for every hour worked over 40 hours

The compensation that’s paid out in these cases differs under state and federal laws.

Under state law, an employee can claim unpaid wages dating back six years. Federal laws cover only two years, unless it’s shown that the employer knowingly and willfully withheld the overtime. If that’s proven, the employee is also entitled to liquidated damages.

If an employee wins the claim, he or she can take the compensation based on whichever law provides the greatest benefit.

The stakes are high for business owners. Not only can compensation run thousands of dollars per employee, but there are also legal fees and penalties.

Moreover, while discrimination cases must first go to the Equal Employment Opportunity Commission or New York State Division of Human Rights before they move to the courts, wage-and-hour lawsuits can be immediately commenced against an employer, Doherty said.

On Aug. 15, Starbucks Coffee    Co. agreed to pay $1.6 million to store managers who said they were denied overtime pay. The case was resolved just days before it was scheduled to go to trial.

Two days later, more than 100 New York associates of PricewaterhouseCoopers   filed a class-action suit alleging that the accounting giant failed to pay them overtime wages.

In early August, salaried managers atRaymour & Flanigan    sued for overtime, claiming the well-known furniture retailer missclassified them as “exempt.”

The best line of defense is prevention, as the law presumes that everyone is entitled to overtime unless they meet specific criteria, Higgins said.

“The laws are narrowly construed against the exempt status,” he said. “If there’s a question, they generally favor the employee.”  Source:  Pam Allen.  The Business Review.


Posted on August 26, 2011, in Compensation, Economy & HR, Employee Engagement and tagged , , , , , , , , , . Bookmark the permalink. Leave a comment.

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