Overtime-Pay Lawsuits Surge During Lousy Economy
On Monday, the US Supreme Court heard arguments in a class-action lawsuit that pits pharmaceutical sales reps against drug maker GlaxoSmithKline. At issue: Do the employees—who are all salaried workers—deserve overtime pay?
It’ll be a couple months before the Supreme Court answers that question, but this much is clear: GlaxoSmithKline and the pharmaceutical industry aren’t the only ones facing challenges from employees who want overtime. A recent report published by the law firm of Seyfarth Shaw found that 7,006 so-called wage and hour lawsuits were filed in the 12-month period ending in March 2011, a 32 percent increase compared to 2008 and a 378 percent increase since 2000.
Under a federal law known as the Fair Labor Standards Act (FLSA) employers must pay certain employees (known as non-exempt workers) a minimum wage plus overtime (at least 1.5 times their hourly wage) if they work more than 40 hours in a week.
On the other hand, the minimum wage and overtime laws do not apply to employees who are considered to be exempt workers. These are people who earn an annually salary of at least $455 a week and $23,600 annually and either:
- Manage, hire and fire other employees
- Are executives, administrators, professionals with advanced degrees (such as lawyers or doctors) or computer employees
Non-exempt workers include:
- Anyone who earns less than $455 a week or $23,600 a year
- People who do manual labor or blue-collar jobs
- Police officers, firefighters and paramedics
Still other groups of workers may be exempt from overtime pay requirements, but not from the minimum wage requirements. These include live-in housekeepers and nannies, movie theater employees, some heavy equipment sales people and commissioned salespeople in retail jobs.
Under the FLSA and state laws, non-exempt employees must be paid an hourly salary and overtime. Exempt employees, on the other hand, can be paid either an annual salary or an hourly wage and overtime—it’s up to the employer to decide which salary structure is most appropriate.
Why the Increase in Litigation?
Wage and hour lawsuits usually revolve around two key themes:
- In some cases, non-exempt employees claim they’re not being paid for all of the hours they’ve worked. For example, fast-food employees might be told to clock out once the restaurant closes for the night, but remain at work until the restaurant has been cleaned. Or an office employee might be required to periodically read and respond to email after going home for the night, but not be paid for the off-site work.
- In other instances, exempt employees may argue that they’ve been improperly classified and should actually be a non-exempt worker who is eligible for overtime pay. This would include the GlaxoSmithKline drug sales reps, who are challenging both their employer and the FLSA, which classifies them as exempt employees.
Many analysts speculate the lousy economy has contributed to the steep increase in lawsuits, but new technology may also be partially to blame.
In some instances, companies trying to operate more efficiently are demanding more of employees without offering a bump in pay. For example, a recent suit against Verizon Wireless alleged that customer service representatives were required to be at their desks 10 to 15 minutes before the start of their shift so they could start taking calls the moment they were officially on the clock. While 15 minutes might not seem like much, it adds up to about five unpaid hours of work each month and more than a full week of unpaid work in a year.
The federal government’s shifting policies also incite litigation, says Richard L. Alfred, chair of the National Wage & Hour Litigation Practice Group at Seyfarth Shaw LLP.
“The U.S. Department of Labor (DOL) has changed its position under the current administration, creating legal issues where none had previously existed,” Alfred says. “Pharmaceutical sales reps and mortgage loan officers are two examples where the law had previously been settled that these employees were exempt. Changes in [the DOL's] position as to both of these jobs has created the opportunity for lawsuits.”
Other wage and hour lawsuits come from former employees who were let go from their jobs. Imagine that you’ve been terminated from your job with little or no severance. For some, a lawsuit may be a way to wring some money from an employer who treated them unfairly.
“High unemployment and layoffs cause more employees to seek legal advice about employment terminations,” says Alfred. “[This] gives plaintiffs’ attorneys an opportunity to ask about wage and hour issues that may then lead to new lawsuits.”
And then there are those who argue technology is largely to blame. Gone are the days when an employee was truly “off the clock” after walking out of the office door. Today’s technology means you may be fielding work calls and emails at any time, day or night.
“[The] 21st century workplace is very different from the 1930s, when the Fair Labor Standards Act was passed,” Alfred says. “Difficulties applying this out-of-date law to today’s workplace raise difficulties for employers that open the door to employees and their lawyers to second guess employer decisions.”
Alfred predicts that we’ll continue to see an increase in new wage-and-hour lawsuits in both state and federal courts for at least the next three to five years.