Volume 40, Issue 4 April 2005
An Emerging Threat:
Wage and Hour Litigation
by David L. Barron
Bruce gets to work 30 minutes early because he wants to make sure his work area is clean. Sally likes to eat her lunch at her desk, and surfs the Internet on her lunch hour. Elaine, a salaried office manager, spends most of her day typing and filing. Do any of these people work for your company? If so, you may have a wage and hour lawsuit in the making.
A disturbing trend has emerged in the last few years. Wage and hour class actions now outnumber discrimination class actions. With the publicity surrounding the Department of Labor’s revisions to the overtime regulations, employee pay has become a hotbed of litigation, rivaling personal injury claims in many cities.
The reason for this sudden surge in litigation? Money. Unlike discrimination and harassment cases, which are difficult to prove and specific to the individual employee, lawsuits over pay practices are clearcut and often impact numerous employees. If an attorney can merely sign up one employee, the lawyer may be able to convince a court to provide notice to other similar employees, so they can sign up, too.
Even if the damages are small individually, collectively, the damages can be huge. Moreover, damages can be doubled if the violation is willful, and attorneys can collect their fees, costs and interest.
So how does an employer avoid this onslaught? The answer, like in most other areas of employment law, is to perform a diligent inspection of your company’s policies and practices to ensure they are in accordance with the law. Wage and hour laws are complex, with many intricacies and gray areas. The following is a list of items that have proven to be most troublesome.
Working Off the Clock
Non-exempt employees must be paid for all hours worked. This sounds simple, but can become difficult to administer in the real world. Some employees may want to get to work early, work during their lunch hour or work after hours. All of this time must be counted.
Often, managers forget how important it is to police the rules in this area. Employees playing on the computer during lunch can later argue they were working. Allowing employees to sit in their office, or prepare their workstation prior to clocking in is a lawsuit waiting to happen. Lastly, flexible arrangements or unspoken deals between supervisors and employees will not hold up in court. The solution to all of these problems is to implement and enforce a strict rule preventing employees from working off the clock, no exceptions. If an employee violates the rule, pay the employee, but issue appropriate discipline.
Improper Classification as Exempt
Nowhere has litigation heated up more so than disputes over employee entitlement to overtime. Surprisingly, many companies decide to pay employees on a salary basis for reasons other than a careful analysis of the law. Whether classifications are based on the industry standard, convenience or “that’s just the way it has always been,” the reasons will not carry the day.
The only preventative tool in this area is to periodically audit all exempt classifications to ensure they are truly exempt under the law. Red flags to look out for include managers who have few, if any, subordinates, or who rarely make critical decisions concerning hiring, firing or other employment actions. Be wary of how sales employees are classified. Outside sales persons are exempt, inside sales persons are not exempt.
Customer service, troubleshooting or technical assistance is almost always non-exempt work. If you employ computer workers, you should be intimately familiar with the special exemption for computer professionals.
Not everyone who operates or works on a computer, even if they appear to have specialized knowledge, can lawfully be classified as exempt.
Travel Time, Meetings, Etc.
Keeping track of employees’ time when they are in the office or at their assigned station is difficult enough. Keeping track of their time when employees are involved in extracurricular activities such as travel, meetings or special assignments can be a nightmare. Depending on your company’s timekeeping system, these duties may not even be encompassed within the customary system of keeping time. For this reason it is easy for time to fall through the cracks.
Although the rules in this area can be difficult, the overarching requirement is that employees must be paid for any time they are actually working. Meetings or training related to an employee’s job is compensable. Travel to and from work and home is not compensable. In contrast, travel between worksites typically is compensable. Out of town travel time must be paid if it takes place during the employees’ normal work date.
Typically, travel time is not compensable if it takes place outside of the employee’s normal workday. But, employees who “take work with them” or work in their hotel room are performing compensable work; they are not traveling.
The lines between the workplace and home, off and on-duty, are becoming increasingly blurred. It is no longer the case that only exempt professionals are accessible 24 hours per day. In many companies, non-exempt employees work from home, carry Blackberries or check e-mail every evening.
Coordinating all of these changing realities with company policy and the applicable wage and hour laws is a daunting task.
That said, it is one that can either be addressed proactively and cheaply, or one that can be reacted to when a lawsuit is filed. Most prudent employers will choose the first approach.
David L. Barron is an attorney at Alaniz and Schraeder in Houston. He represents employers in employment-related matters.
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