HR Management & Compliance

Lawyers See Easy Money in Wage-and-Hour Litigation

By BLR Founder and CEO Bob Brady




Wage-and-hour rules have been around for nearly three-quarters of a century—ever since FDR’s New Deal— so it’s hard to picture them triggering the next wave of employment litigation, but California attorney Marc Jacuzzi thinks otherwise.



Litigation Tsunami?


“Plaintiffs’ lawyers are leaving the ugly world of discrimination and going to wage-and-hour litigation because it is easy,” says Jacuzzi, of Simpson, Garrity, Innes and Jacuzzi, P.C., in South San Francisco.


Jacuzzi says that discrimination lawsuits are “ugly” in lawyers’ eyes because they require hard work, and high-money verdicts are hard to come by. The risk/reward equation is not always attractive to lawyers.


Jacuzzi’s comments came during the California Employment Law Update conference, held Nov. 4-6 at the Westin St. Francis Hotel in San Francisco. The 3-day program, attended by more than 80 HR professionals, was sponsored by the Employer Resource Institute, a BLR affiliate.


Faster Payback


Wage-and-hour cases, on the other hand, can yield a faster payback with less work. Jacuzzi described how a law firm in San Jose is advertising on BART, the San Francisco-area public transit network. Its ubiquitous posters ask, “Have you missed a meal or rest break?” The ads appear to be targeted at the Latino community. Members of the firm are also posting their business cards on church bulletin boards.


“They have a running caseload of 60 cases each,” Jacuzzi said. “And they are looking to get $10,000-$15,000 in attorney’s fees out of each case.” The lawyers’ tactic is to find employers that have violated wage-and-hour law in the way that Starbucks was recently found guilty of doing. (Managers at Starbucks were doubling as baristas. Because they were spending more than half their time serving customers, they were considered nonexempt under California law and entitled to overtime pay.) Through large-scale advertising, the lawyers sign up large numbers of employees, and employers get stuck with big settlements for violations.



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In Jacuzzi’s view, this could be a serious problem for employers as other law firms try to hop aboard this new gravy train. He said that in 2008, more than 1,200 wage-and-hour cases were filed in the Southern District of Florida. He urged the HR managers in attendance to take the steps necessary to protect their firms.


Misclassification


One of the key areas of concern is the misclassification of employees, as in the Starbucks case. When an employee performs both exempt and nonexempt work, employers often assume that because the exempt work (such as management and supervision) is the “real job,” the employee is exempt. This is truer under federal law, where there is no hard and fast percentage that “tips” the legal balance.


Federal judges and administrators have more discretion under the federal regulations than they do in, say, California, where there is a rule saying that if employees spend more than 50 percent of their time on nonexempt work, they are nonexempt. (Jacuzzi said that the Starbucks managers/baristas would probably have been considered exempt under federal law.)


First Steps


As a first step, Jacuzzi recommends reviewing job descriptions to make sure they are “for real.” If they say one thing but the employee actually does another, you will start off in the wrong place if challenged in an audit or lawsuit.


When beginning this kind of review, don’t announce that you are doing it “for classification purposes.” That could stir up trouble you don’t need. Instead, look at jobs on a case-by-case basis, starting with those where you know employees do a combination of exempt and nonexempt duties, such as the Starbucks “working managers.” Just say you are reviewing job descriptions as part of the normal HR process. Talk to managers, but again, don’t make a point of saying that it is being done for wage-and-hour purposes. Just say that it is being done for compensation purposes.


Start out by looking at areas where you think you may have exposure, maybe in cases where you have had layoffs and managers and supervisors are filling in to keep up with production demands. If you see that you’ve got problems, proceed with care. Jacuzzi points out that it is easy to blunder into a situation where you “create” the problem by uncovering it.



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Your Career


A decision about whether to proceed with any kind of investigation should be made by management. The liabilities can be very large because they can go back for years and potentially cover many employees. On the one hand, you don’t want your organization to be blindsided when a complaint is made or an audit begun. On the other, you don’t want everyone pointing their fingers at you if an investigation that you initiated leads to liability that might have been avoided with proper planning.


My advice is this: Review a sample of job descriptions. See if you think you have a problem. If you fear that you do, consult with counsel before proceeding. If you hide your head in the sand, you could create exposure for your organization. If you get out too far in front too fast, you could end up holding the bag when everyone else runs for cover.


Anyway, that’s my e-pinion. I’d love to hear yours. Rbrady@blr.com