From the Experts: Preventing Wage-Hour Lawsuits, Part 1; Financial Gambles and Avoiding the Risks

This month’s expert is
Kurt A. Franklin, a partner in the San
Francisco office of law firm Hanson, Bridgett, Marcus,
Vlahos & Rudy.

When it comes to wage
and hour law, many employers now understand that their finance and operations people
made aggressive exempt-status and other wage and hour-related determinations
that are now coming back to haunt their organizations in the form of big wage
and hour lawsuits and payouts. In this two-part series on preventing wage and
hour suits, we’ll look at strategies for avoiding lawsuits, how to conduct a
wage-hour audit, and what to do if your audit turns up problems.

Do Aggressive Decisions
Save Money?

Wage and hour lawsuits
are beginning to surpass other employment claims in the number of daily filings
and are grabbing headlines with top-dollar verdicts and settlements.
Experienced class action plaintiffs’ attorneys are demanding that employers
compensate misclassified employees for all overtime and missed meal and rest
periods. The risk is significant, and employers are faced with the deferred
cost of their exempt-status decisions—even as to high-earning positions such as
software engineers, loan consultants, stock brokers, commissioned insurance
agents, store managers, and unionized drivers. Recent class action settlements
that illustrate this problem include the $65 million IBM paid to 32,000
computer installers and $53.3 million Albertsons paid to thousands of grocery
store workers.

Besides the
misclassification cases, plaintiffs’ attorneys are bringing other wage-and-hour
claims, such as:

I N FUTURE ISSUES

• meal and rest period
claims

• off-the-clock work
claims (including work from home)

• donning and doffing
claims

• claims for overtime on
non-discretionary incentive compensation schemes, such as commissions, piecework,
and bonuses

• hours shaving and
inappropriate rounding claims

• tip-pooling claims

• claims for failed
reimbursements, such as for mileage, Internet service, and cell phone service

• claims for failure to
pay checks through a local California
bank

400+ pages of state-specific, easy-read reference materials at your fingertips—fully updated! Check out the Guide to Employment Law for California Employers and get up to speed on everything you need to know.

Avoiding Risks

So what can employers do
to lower the risk of getting hit with a lawsuit challenging the organization’s wage
and hour practices? Understanding the basic legal wage and hour requirements is
the first step toward developing a strategy to avoid wage and hour claims.

Businesses should
consult with their employment counsel and human resources professionals on
meeting wage and hour requirements, but some important California rules in a nutshell include:

• The California minimum wage is $7.50 per hour
and will rise to $8.00 on Jan. 1, 2008.

• Overtime at time-and-a-half
is due (for nonexempt employees) after 8 hours per day or 40 hours per week.

• Double time is due
after 12 hours per day.

• Premium pay is owed on
the 7th consecutive workday.

• Employers must provide
a 10-minute rest period for every 4 hours worked.

• Employers must provide
an uninterrupted 30-minute meal period after an employee works 5 hours.

• Employees may be
exempt from the overtime laws if they are primarily engaged (spending more than
50 percent of their time) in duties that meet an exemption (administrative,
executive, professional, or outside salespersons).

• Exempt employees’ work
is typically intellectual or creative and requires the exercise of discretion
and independent judgment.

Employers should also
recognize that happy employees are less likely to sue or take on the mantle of
class representative. In contrast, unhappy employees may be sending signals to
their supervisors—or even top-level management—telling the company that they
feel undervalued, underutilized, or voiceless. Pay attention. These are the
employees who will research wage and hour issues and find an attorney on the
Internet to represent them. So, to reduce the chances that you will be sued,
look for the employees who have a pervasive dissatisfaction with their work and
try to address their concerns. Internal avenues for redress may be helpful to
thwart litigation if communicated within a no-retaliation policy. At the same
time, employers should take steps to understand and manage employee
expectations with respect to job security, job training, promotion opportunities,
and salary increases.

Next Month: Conducting
Audits

Next month, in part two
of this series, we’ll explain the basics of conducting a wage-hour audit along
with safe strategies for fixing problems the audit reveals.