Wage and Hour Lawsuits

SB: This is Steve Bruce for the HR Daily Advisor. Today we have a question from Kelly in Arizona. Kelly says,  I’m hearing about a flurry of wage and hour lawsuits. What should I be looking out for?

Kelly, wage and hour suits are proliferating because they are fairly easy to bring, and because the multiplier effect of a class action can mean these suits offer substantial settlements–at least for the attorneys involved.

For example, take a case where an employee hasn’t been paid an overtime premium for two hours a week. Say a fifteen-dollars-an-hour worker. That’s 15.00 a week of overtime. No big deal, right?

But multiply it by two years, 50 weeks a year. That’s 1500.00. Now multiply by 100 fellow workers—that’s 150,000 more, double it for penalties, and the amount is starting to add up.

Another factor is that wage/hour rules are complicated enough that most companies are probably in violation to some degree. An opposing attorney just has to find out where to look and there’s a case that’s probably hard to defend.

So, what are the most common violations?

First, there is off the clock work. In one typical scenario, a loyal employee, knowing that the employer is struggling, may offer to take work home—“don’t worry about paying me”—but you can’t let that happen. If non-exempt employees work, you have to pay them, even if you told them not to work. (You can discipline them, but you have to pay them.)

And then there’s the more blatant violation—for example, a restaurant manager tells a waiter, clock out and then set up for tomorrow. Or maybe there’s a mechanic who is expected to come in early to do extensive setup to get ready for the day. That work may well need to be paid.

Another common problem crops up over interrupted lunch breaks. Lunch time, if 30 minutes or longer, can be unpaid, but only if the person is entirely relieved of work duties. If the person has to answer the phone, or perform other duties, that lunch is work time and has to be paid. This is a particular problem when the company uses a timekeeping system that automatically subtracts lunch time.

And then there’s a third common challenge–misclassification. That is, calling someone “exempt” who should be non-exempt. For example, calling someone an exempt “store manager” who is actually working a cash register for 9 hours and then doing some scheduling and inventory work.

If you get caught at that, the numbers can add up really fast. Say the person, paid $25,000 a year on a salary basis, works 50 hours a week. That’s about $12.00 an hour for a 40-hour week. That means an extra 10 hours each week owed to the employee at the overtime rate of $18.00 an hour. Times 52 weeks for two years, that’s $18000, doubled is $36,000 times 2 managers per store is $72,000, times100 stores is 7.2  million you owe.

Bottom line, it pays to regularly audit and monitor your wage and hour practices.

Kelly, thanks for your question and best of luck in all your endeavors.

This is Steve Bruce for the HR Daily Advisor.