Many employers are now making the unhappy discovery that their finance and operations people made aggressive exempt-status and other wage and hour-related determinations that are coming back to haunt their organizations in the form of big wage and hour lawsuits and payouts. Attorney Kurt A. Franklin of the San Francisco office of Hanson Bridgett, LLP, discusses the issue in today’s installment of CED.
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.
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Besides misclassification cases, plaintiffs’ attorneys are bringing other wage-and-hour claims, such as:
- 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
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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 $8.00 per hour.
- 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.
In tomorrow’s CED, we’ll explain important self-audit (and post-audit) strategies. We’ll also introduce a unique checklist-based audit system that will almost conduct your audit for you.