April 17, 2012

More American workers sue employers for overtime pay

Americans were pushed to their limit in the recession and its aftermath as they worked longer hours, often for the same or less pay, after businesses laid off almost 9 million employees.

Now, many are striking back in court. Since the height of the recession in 2008, more workers across the nation have been suing employers under federal and state wage-and-hour laws. The number of lawsuits filed last year was up 32% vs. 2008, an increase that some experts partly attribute to a post-downturn austerity that pervaded the American workplace and artificially inflated U.S. productivity.

Workers' main grievance is that they had to put in more than 40 hours a week without overtime pay through various practices:

•They were forced to work off the clock.

•Their jobs were misclassified as exempt from overtime requirements.

•Because of smartphones and other technology, work bled into their personal time.

"The recession (put) more pressure on businesses to squeeze workers and cut costs," says Catherine Ruckelshaus, legal co-director of the National Employment Law Project. If employers had to bear the actual expense of overtime, she says, they likely would have hired more workers in the economic recovery.

In response, employers are playing defense. They're drawing clearer lines between workers and managers, and in many cases, reining in modern office privileges, such as company-issued smartphones and telecommuting. The upshot, in many instances, could be a very different American workplace.

Courts, meanwhile, must reconcile decades-old labor laws with ever-evolving technology. The spread of BlackBerrys and iPhones has many workers tethered to employers, for better or worse, even during off hours and vacations.

The controversy has reached the Supreme Court, but in a case involving an age-old profession: sales. Monday, the justices will hear oral arguments in a class-action lawsuit against drugmaker GlaxoSmithKline. Pharmaceutical sales representatives — traditionally classified as exempt from overtime pay — say they've been misclassified, a stance backed by the Labor Department in another case. Glaxo says the sales force clearly is exempt under current law.

Legacy of another time

Employers say the explosion of lawsuits shows how the 1938 Fair Labor Standards Act (FLSA) — at the center of the Glaxo case — has become outmoded in an age when most employees want the flexibility to work at home or answer office e-mail while running about on their free time.

"The law has not kept pace with the contemporary workplace," says Randy MacDonald, IBM's head of human resources.

Many companies have reclassified salaried executives as hourly employees — often to the consternation of the workers themselves, says Dan Yager, general counsel of the HR Policy Association, which represents human resource professionals. Such a strategy lets employers head off lawsuits by paying a lower basic wage that accounts for expected overtime.

Under the FLSA, employees are entitled to overtime unless they're executives who manage and hire and fire employees; administrators who make key decisions; or professionals — such as lawyers and engineers — with advanced degrees, among other criteria. Also exempt are certain information technology workers and sales representatives whose hours can't easily be tracked.

Employees must earn at least $455 a week to be exempt. While all hourly employees are entitled to overtime, salaried workers may also qualify if they don't fall under any of the exemptions.

Last year, 7,006 wage-and-hour suits, many of them class actions, were filed in federal court, nearly quadruple the 2000 total, according to defense law firm Seyfarth Shaw. Meanwhile, in fiscal 2011, the Labor Department recovered $225 million in back wages for employees, up 28% from fiscal 2010.

Labor has added 300 wage-and-hour investigators the past two years, increasing its staff by 40% to 1,050. The department "has stepped up its efforts to protect workers," particularly "in high-risk industries that employ low-wage and vulnerable workers," such as hotels and restaurants, says Nancy Leppink, deputy administrator of the wage-and-hour division.

Several attorneys for plaintiff workers say employers wrung more output from fewer employees during recoveries following the 2001 and 2007-09 recessions. Both upturns initially yielded sluggish job growth.

"A lot of companies make a business decision to say, 'We can cut corners on this, and we won't get sued,' " says plaintiffs' attorney David Schlesinger of Nichols Kaster in Minneapolis.

U.S. productivity, or output per labor hour, rose 2.3% in 2009 and 4% in 2010 — a period that includes the recession's final months and its aftermath — vs. increases of 0.6% to 1.6% the previous four years. Some economists say the gains are overstated because many overtime hours were not properly counted, as employees worked off the clock.

Richard Alfred, chairman of Seyfarth Shaw's wage-and-hour practice, has a different view. He agrees that the recession helped drive the growth in lawsuits, but he says that's because many laid-off workers became lead plaintiffs in class-action suits to reap financial windfalls after they couldn't find new jobs.

The biggest reason for the lawsuit surge, he says, is that lucrative settlements a decade ago prompted labor lawyers to file copycat complaints, and the suits are far simpler and less costly to pursue than discrimination cases.

With class-action cases exposing companies to multimillion-dollar judgments, "the liability becomes so substantial that a vast majority of these cases settle," says Garry Mathiason, vice chairman of Littler Mendelson, which defends companies in such lawsuits.

Case in point: In November, Oracle agreed to pay $35 million to settle claims by 1,666 software testers, technical analysts and project managers that they were denied overtime because they were misclassified as administrators or professionals. The company did not admit wrongdoing.

The vice of technology

The newest variety of plaintiff is a worker with a handheld device. Jeffrey Allen, a sergeant in the organized crime unit of the Chicago Police Department, says he got a near-constant barrage of e-mails, text messages and calls on his department-issued BlackBerry until around 10 p.m. every weeknight. Each required a response lasting from a minute to an hour or two, he says.

While dining with his family, mowing the lawn or watching his son play soccer, Allen often had to step away to coordinate search warrants and compile reports on seized assets, among other tasks. Two years ago, he filed a class-action suit against the city on behalf of himself and other hourly paid police officials. Allen says they're owed back overtime pay from 2007 to 2010. The case is pending.

"You feel like you don't really get a break from your job," says Allen, 47, who still works for the department, but in a different role.

Roderick Drew, a spokesman for the city's law department, says it's policy to let police officials request overtime. In a legal filing, the city argued that Allen failed to show that his communications were more than an insignificant amount. Some courts have said that applies to anything less than 10 or 15 minutes.

Other wage-and-hour cases seek compensation for off-the-clock work in the office. In a class-action complaint filed in February against Verizon Wireless, customer service representative Heather Jennings says she had to be at a Mankato, Minn., call center 10 to 15 minutes before her shift officially started. Jennings says workers such as herself had to log into their computers and open databases so they were ready to take calls.

"I thought it was unfair," says Jennings, 31, who was laid off by Verizon last May.

Verizon spokesman Tom Pica says the company "compensates its employees fairly and fully." In a legal filing, Verizon said that Jennings' pre-shift activities were minimal and that she failed to take advantage of complaint procedures at the time.

Other lawsuits allege that employers gave workers fancy titles to avoid paying overtime.

Richard DeLeon is among more than 750 current and former assistant store managers of Big Lots in Florida suing the discount department store chain. DeLeon, 57, says he spent his workday running cash registers, unloading trucks and tidying the Cutler Ridge, Fla., store.

He says managerial functions — such as assigning tasks to employees — took up 10% to 15% of his time, but he couldn't hire, fire or discipline workers. DeLeon says he typically worked about 60 hours a week and earned $43,000 a year. His workload increased, he says, when managers had to run stores with fewer employees in 2009.

"This is really a game plan by the company to keep labor costs down," says DeLeon's lawyer, Mitchell Feldman of Feldman Fox & Morgado.

Big Lots did not return messages seeking comment. In court papers, the company said the "primary duty" of the lawsuit's lead plaintiff, Angela Schenburn, was assistant manager, but "at times" she may have done lower-level tasks "concurrently."

Even office workers who sometimes earn $100,000 a year, such as securities brokers and financial advisers, are demanding overtime pay, arguing they're just salespeople rather than key decision-makers.

In a class-action case, Scott Finger, 46, a former MetLife mortgage loan officer, says he had to work about 65 hours a week at the firm's Melville, N.Y., office to meet sales targets while earning about $5,700 a month in commissions. While he recommended whether to approve loans, he says, underwriters made the final decisions.

MetLife spokesman Ted Mitchell would not comment on pending litigation. The company has asked a judge to dismiss the case, saying it duplicates a previously filed suit.

A changing workplace

Companies say the lawsuits have forced them to grant workers less flexibility.

Several years ago, IBM voluntarily reclassified 7,000 salaried technical and support workers earning an average $77,000 a year to hourly employees after it settled a class-action labor suit for $65 million. The company cut their base salaries 15% to account for potential overtime, says IBM's MacDonald.

IBM's Shar Anderson oversaw 20 workers in a customer service group. "It made me feel less valuable to the company," says Anderson, 55, who has a bachelor's degree in computer science and several professional certifications. Anderson, who's now in a similar but higher-level salaried position, says she "wasn't able to do my job" because she sometimes had to hand off emergency responses to colleagues after 5 p.m.

In a survey by the HR Policy Association last year, a third of the 155 large member firms that responded said they've restricted telecommuting as a result of the lawsuits, and 56% said they've curbed the use of communications devices outside the office.

Johnna Torsone, head of human resources for mailing systems maker Pitney Bowes, says the firm would like to give about 30 overtime-eligible sales support staffers the ability to work from home but has held back while searching for a way to track their time.

"You just don't take the risk," she says.

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