The feds estimate that 70 percent of employers are not in compliance with the Fair Labor Standards Act (FLSA). "That’s a gross understatement," says Attorney William J. Anthony. He suspects that it’s more like 95 percent that are not in compliance with either federal or state laws on wage and hour matters.
"There are a lot of wage and hour laws, and most employers violate one or more on a regular basis," Anthony says. "The bad news is that we are just in the infancy of a long-term trend of increasing wage-and-hour litigation. The good news is that these claims can be avoided."
Anthony made his remarks at a recent seminar sponsored by national law firm Jackson Lewis LLP, where he is a partner in the Hartford, Connecticut, office. He was joined in the presentation by Senior Associate David R. Golder.
Get into Compliance Now
"Get into compliance," says Anthony, because "the suits will come your way." Anthony offers the following factors to help employers understand the need for immediate attention:
- The Department of Labor (DOL) has added new investigators for wage and hour.
- DOL can be expected to be "very active" during the Obama administration.
- DOL collections of back wages are up dramatically over the last decade.
- FLSA collective actions (class action cases) have increased four-fold since 1997, overtaking EEO claims in 2001 as the most common class employment cases in federal court.
Anthony notes that his firm, Jackson Lewis, is now dealing with 250 class actions, compared with 195 last year. And they’ve added seven in the last two weeks. Some are major, trying to certify a national class; some are regional, and some are local. "That’s a lot of suits," he says.
Suits often go in waves on the basis of industry, Anthony notes. For example, hospitals are now being hit. The hospitals that are sued are trying to defend themselves by saying, "Every hospital violates the law," but that is no defense, Anthony notes. Many compensation systems are driven by industry practices, but that just means that when one employer gets hit, the entire industry gets hit.
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Pharmaceutical companies are another group that has been hit, all with the identical claim—that their sales reps are not "outside sales" people. These reps, who visit doctors’ offices to tout the company’s drugs, have traditionally been considered outside sales reps, and thus exempt.
The argument being used now is that these reps don’t actually "sell." They encourage doctors to prescribe their product, but the sale happens at the pharmacy. "It’s form over substance," Anthony says, but it’s happening.
When Is an Employee Working?
"There is a tremendous amount of litigation on off-the-clock claims," Anthony adds. Retail stores around the country are being hit, he notes. What happens is that corporate says, based on sales volume, “Here are how many labor hours you can have.” That’s a built-in incentive for the manager to allow or even encourage unpaid work. "Clock out, finish up, and go home." That’s a claim in the making, Anthony says.
If employees are working off the clock, they must be paid. Many want to pitch in for no pay, but it doesn’t matter, says Golder. Employers must compensate employees for unauthorized work when the employer "suffers or permits" the employee to work.
An employer suffers or permits an employee to work in cases in which the employer knew or had reason to believe the employee was performing work. "Actual knowledge is not required," Golder says. "If the supervisor knows, the company knows.”
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Some examples of cases of unauthorized work include:
- Oiling machines before or after work
- Wiping down tables after clocking out
- Putting change in the cash register before work
- Counting cash after the shift
The overriding point, says Anthony, is to take a look at your practices and policies. Ferret out any statements that might drive managers to encourage off-the-clock work. These are typically what drive class action claims.
In tomorrow’s Advisor, we’ll get more of Anthony’s and Golder’s tips, and we’ll take a look at a unique one-stop solution for your HR challenges.
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