This month’s expert is
Arthur F. Silbergeld, a partner in the
Angeles
Wage and hour class
action lawsuits have become an unfortunate—and expensive—reality for many
Often, an organization’s early response to a new class action suit can help set
the stage for an appropriate resolution—and HR staff is a vital link in this
process. The first installment of this two-part series on defending
wage and hour class actions explained how a class action case works. This second
installment takes a detailed look at what HR can do to help defend and resolve
these lawsuits.
Information Gathering
Evaluating the merits of
a
wage and hour class action complaint initially rests in the hands of the HR
staff working closely with the company’s attorney. The HR manager must provide
the attorney with detailed information about the named plaintiffs, including their
personnel files, employment histories, positions held, and pay rates.
If the suit alleges
exempt misclassification, the HR manager must: obtain all relevant job
descriptions; provide the lawyer with access to individuals who supervise the
alleged class employees and can describe the work performed in the challenged
job classifications; identify pay rates and ranges for each position; and retrieve
the time sheets and payroll records of all current and former alleged class
members in the time period the complaint covers (typically four years before
the date the complaint was filed).
Evaluating the Case
Working with these
documents and data, the HR manager and attorney have three key tasks: 1) to assess
whether there is a significant risk of liability; 2) to develop arguments that
the class cannot be certified; and 3) to estimate back pay damages, interest,
and other penalties along with the financial impact on the company of reclassifying
the positions as nonexempt or modifying another challenged policy or practice.
These determinations will help inform the company’s litigation strategy.
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1. What is the liability
risk? The
employer’s liability risk for the challenged exempt classification or other pay
practice will depend on applying current law to the facts. Defense counsel will
review federal case law and the U.S. Department of Labor’s regulations as well
as
law, which may impose a different standard.
For misclassification
claims, for example, it is necessary to evaluate the work employees performed
in the challenged classification. Job descriptions tell some, but often not
all, of the story of the employees’ work. With your attorney’s assistance,
additional information may be obtained from a sampling of reliable supervisors (including
those promoted out of the challenged classification) and current employees.
Changes in job duties over time, as well as variations in the duties from one
business location to the next or from one scheduled shift to another, may be
critically important.
The HR manager must
assist in determining how much time employees in a classification spend
performing each task. Time spent performing both managerial and nonmanagerial
tasks simultaneously is counted as nonexempt. The evidence used in quantifying each
task must be sufficiently representative of all persons in the class to be
reliable so that the company can determine if the challenged position was
correctly classified during the relevant time period.
2. Can class
certification be successfully opposed? The best means of defeating plaintiffs’ efforts
to certify a class are to show that there are not enough members of the class,
that there are no common questions of law or fact, or that the asserted claims
are not typical of the employees in the challenged position(s). The HR manager
must be able to say how many individuals are in the class during the relevant
time period. Although there are exceptions,
to consist of at least 20 individuals and sometimes require at least 30 people
or more. Even if the number is significantly higher, the data on class member
numbers will be useful for damages estimates.
Changes or significant
variations in job duties of alleged class members may be the basis for showing that
there are no common questions of fact. For example, some managers of retail
stores in a chain may oversee workforces of 200 or more employees while managers
at smaller locations may have fewer than 20 subordinates. Further, the named
plaintiffs may have asserted claims that are not typical of other class members.
One recent meal period decision, for example, denied class certification in
light of evidence that employees at some locations took lunch periods while employees
at others were discouraged from doing so.
3. How much back pay,
interest, and other liability/ expenses are involved? The HR manager must assist
the company’s attorney in calculating damages. This often involves creating
spreadsheets identifying each potential class member, an average hourly pay rate
applicable to each (even if paid on a salary basis), a certain number of
assumed hours of overtime per pay period, and calculating waiting-time
penalties at the final pay rate. Interest and attorney’s fees (both plaintiffs’
and defense) must also be estimated.
The Bottom Line
Compiling detailed
information on risk, certification possibilities, and financial impact can help
a company make early and informed decisions about how best to defend a
wage-hour class action. A company’s HR manager and staff need to be at the
heart of developing this information, providing invaluable assistance to
defense counsel, who must provide the best possible legal representation, and
to company executives, who must decide whether and for how long to pursue the
defense.