Disputes over overtime pay prompt lawsuits by workers, land companies in courtrooms
When Dick's Sporting Goods reported fourth quarter results last week, the Findlay retailer with stores in 42 states explained that its profits would have been higher if not for charges related to settling class-action lawsuits over wage and hour disputes.
A few weeks earlier, the company had indicated in a regulatory filing that it was party to an agreement filed in the U.S. District Court for the Western District of New York that called for it to pay as much as $15 million to settle more than 20 related wage and hour class-action lawsuits covering claims under the laws of 36 states.
Dick's is not alone in coping with allegations of not properly following the law in reimbursing employees for their time. Companies including Costco, Home Depot, Family Dollar, CVS and more -- some in retail but by no means all -- have faced challenges in recent years under the federal Fair Labor Standards Act.
Meanwhile, the U.S. Department of Labor reported in fiscal 2008 that more than 197,000 employees received a total of $140.2 million in minimum wage and overtime back wages as a result of Fair Labor Standards Act violations identified by the department's Wage and Hour Division. Overtime violations alone accounted for nearly 88 percent of all back wages collected that year, which is the most recent report available.
Advocates on one side of the issue make the case that all this back pay strikes back at "wage theft" by employers, who steal workers' time and let job time creep beyond paid hours. On the other side are those who see attorneys tapping into a bonanza created by confusion over the regulations and the ease of using companies' increasingly sophisticated time keeping systems against them.
In the middle may be workers eager to keep their jobs even if that means putting in a little extra time and managers trying to get more done with fewer resources -- and neither side entirely clear on what is allowed, said Reid Bowman, general counsel for ELT, a San Francisco-based company that offers online training in ethics and compliance with a growing business in offering wage-and-hour training.
Rules governing these issues aren't exactly new. The Fair Labor Standards Act went into effect in the 1930s.
It establishes the federal minimum wage for hourly workers -- currently $7.25 an hour -- as well as sets standards for record-keeping, child labor and overtime pay. Overtime pay of at least 1.5 times the regular rate is required after 40 hours in one work week for hourly workers. The act includes exemptions for certain executive, administrative, professional, outside sales workers and computer personnel.
An update in 2004 attempted to clarify the regulations and make classifications of white-collar workers simpler. The issue of who qualifies as "exempt" continues to be a point of confusion for many, including companies with retail operations.
"Managers in those industries tend to spend a lot of time rolling up their sleeves and doing the work right along with the workers," Mr. Bowman said. So do they qualify for overtime?
The issue was raised in a case filed last year in the U.S. District Court for the Western District of Pennsylvania, where an assistant branch manager for the Citizens Bank at the Monroeville Giant Eagle claimed that his job did not meet the government's standards for management and he should have received overtime pay. In response, Citizens has denied that he was not compensated for hours worked above 40 per week, saying he received a salary for all hours worked.
A similar claim was made in a suit filed two years ago in Ohio against grocery chain Aldi.
A store manager said he was classified as "exempt" and worked more than 40 hours a week without overtime pay although his duties included stocking shelves, running the cash register, cleaning the store and performing customer service. The suit claimed store managers like him did not direct the work of two or more employees and did not exercise independent judgment on matters of significance. Aldi, in its response, said that he did in fact perform some work directly related to management or general business operations.
It's not just managers who may have FLSA issues.
In a suit filed last year in West Virginia by a Dick's employee, the argument made was that workers regularly stayed on the job through breaks, or were called back during breaks, in addition to being prevented from leaving after their shifts ended until managers let them go. Proper calculations of total hours worked would have made many eligible for overtime, the case argued. The case was dismissed without prejudice in January as part of the settlement filed in the New York court.
"The missed meal breaks is an issue you see in a lot of industries," said Brian Heeter, assistant district director in the U.S. Department of Labor Wage and Hour Division's Pittsburgh office, which wasn't involved in any of those particular cases. It does its own investigations and brings its own actions, including a push in 2009 to increase compliance at hotels and motels in Western Pennsylvania.
The DOL staff finds other kinds of problems as well, he said, including companies that don't keep at least two years worth of accurate time records for hourly workers; don't pay for all hours worked; or end up paying an employee less than minimum wage by taking paycheck deductions for things such as uniforms or cash register shortages and paying straight time for overtime hours.
The Obama administration has made enforcement a priority. In 2009, Secretary of Labor Hilda L. Solis announced the Wage and Hour Division had begun adding 150 new investigators. Another 100 investigators were to be hired to ensure contractors working on projects funded by the stimulus package were in compliance.
Mr. Heeter agreed that it isn't always easy to get it right. "There are a lot of jobs out there that don't fall squarely within the regulations," he said. The government doesn't look at job titles but at what people actually do.
Mr. Bowman said ELT advises companies to interview staffers and come up with updated job descriptions. Positions that may have been more independent in the past might have changed.
For example, some now argue that insurance adjusters rely so heavily on computer programs to spit out numbers that they are no longer making independent judgments. "You start to blur the line about whether the job is exempt or not," he said.
By his estimate, 90 percent of cases end in settlements because the potential losses can add up. If, say, 1,000 workers should have been paid for two hours of overtime a day over a two- or three-year period, that can hit the bottom line with a thud.
ELT has found opportunity here. Three years ago, Mr. Bowman said, the firm began running online training sessions for managers. Now, one client uses the company's services to train tens of thousands of people a year. Employees at all levels need to know the rules, he said.
"Up until five years ago, if you asked someone about doing wage-and-hour training, they'd look at you like you had two heads." Now, he said, it's gaining acceptance alongside workplace harassment training and diversity training.
The Department of Labor, too, offers help in understanding the regulations. People want opinions on whether this employee would be exempt and if that hour counts as overtime.
"It's always a good idea for the employer, if there's any question, to give us a call," said Mr. Heeter. Ignorance of the rules, as they say, is no excuse.
"We get a lot of phone calls," he added. "And that's from both sides."
First Published March 14, 2011 12:00 am