Employee Overtime Litigation

A Growing Employer Concern
by Mae Lon Ding

Proper payment of overtime wages and the possibility for large class action lawsuits has been a growing area of concern for employers over the last year. The Los Angeles Times wrote a front page article which gave employees a roadmap on how to sue for wage and hour violations. Wage & hour litigation in the news has included: Perdue Farms $10 million settlement, United Parcel Service $18 million settlement, Radio Shack Corp. $29 million settlement, Farmers Insurance $90 million jury award, Mervyns Department Store $11.3 million dollar settlement, Pacific Bell $38 million dollar settlement, Iowa Beef Packers $7 million litigation loss, Krystal Company restaurants $13 million litigation loss. Additional class action lawsuits involve Motel 6, Taco Bell, and Albertsons. Most companies classify the great majority of their jobs correctly. However, it is also true that most companies classify a number of jobs as exempt from overtime when they would have a hard time justifying the classification in a court of law. For example, employers must pay most inside sales reps, entry level professionals, and executive secretaries overtime. Yet it is common for companies to treat these jobs as exempt from overtime. These problems are widespread. The law says that a job is nonexempt unless you can PROVE it is exempt. The burden of proof is on the employer. In addition, the employer must take care to be in compliance with both federal and state laws, which differ. California wage and hour regulations are more restrictive than Federal wage and hour regulations.

The other problem most employers grapple with is underpayment of overtime hours. The law requires employers to pay nonexempt employees for training time, travel time during the normal work day, meeting time, uniform changing & cleanup time, some types of on-call situations, any time where a nonexempt employee must be at a specified location or on duty. Even specific instruction to employees not to incur overtime does not protect the employer from liability for overtime pay when work over 40 hours in a week is performed. While written policies may be correct, many managers are ignorant of the law or ignore the law, and do not pay or record overtime correctly. Widespread management training is necessary. Often even the payroll department personnel are mistaken in the methods utilized to calculate overtime payments when the complexities of bonuses, commissions, subsidies, and premium payments are involved.

Personnel Systems Associates has seen an increasing amount of work in this area. We conduct comprehensive wage and hour audits. We assist in checking for the proper classification of jobs as to exemption from overtime. We also audit overtime payment practices and procedures. On another front, we have provided litigation support and expert testimony in several class action lawsuits involving exemption status of administrative and managerial jobs.