By Stephanie Armour
USA Today
As companies try to squeeze more work
out of fewer employees, they’re facing a backlash: lawsuits forcing them to pay
back wages for unpaid overtime.
Last fiscal year, the government
collected nearly $143 million in back wages for violations of the Fair Labor
Standards Act, which requires employees to be paid overtime. That’s a 29% jump
over the $111 million collected the previous year statistics released Wednesday
by the Department of Labor Show.
Compensation experts say confusion
about how to classify employees is adding to the overtime problem. Most of the government rules on who gets
overtime hark back to the 1940's and federal officials say there are plans to
revise those classifications. Proposed
revisions could be ready in early 2003- a major and potentially contentious
undertaking.
“Overtime cases have become much more
prevalent,” says Tammy McCutchen, administrator of the Labor Department’s wage
and hour division. “Part of the reason
is because, when the economy is in a recession, more employees complain because
people lose jobs.”
Under the Fair Labor Standards Act,
employers are generally required to pay workers time and one-half worked over
40 per week. The problem: determining who is exempt from that rule.
Executive, administrative and
professional employees are generally exempt, but determining who fits into that
classification is tricky because government descriptions of job duties haven’t
changed since 1949. Legal experts say
the descriptions adopted in the industrial economy are archaic.
Typically, a worker must also earn a
minimum annual salary of $8,000 to be exempt. Salaried workers aren’t always
exempt. Employers might mistakenly fail to pay overtime because they assume an
employee is exempt, while others might purposely cheat workers.
Employers such as Starbucks, Wal-Mart
and Radio Shack have faced litigation. Other cases:
- In a class-action lawsuit, a jury ruled last year that
Los Angeles based Farmers Insurance Exchange must pay $90 million to
settle claims from more than 2,000 adjusters who said they had been
entitled to overtime. Company officials say the case is being appealed.
- Since Many, the government has brought three lawsuits
against poultry processors for alleged overtime violations. The Labor
Department says workers were not paid overtime for time spent changing
clothes.
The latest case was filed last month
against George’s Processing a subsidiary of George’s, based in Springdale, Ark.
George’s did not return calls.
This year, Starbucks agreed to pay up
to $18 million to settle overtime claims alleging that California managers and
assistant managers were not paid overtime.
“This is an extremely significant issue
for employer’s,” says Michael Lotito, a San Francisco based employment lawyer
with Jackson Lewis. “There is so much
activity in this area because the litigation lends itself to class-action
lawsuits with large damages. Plaintiffs’ lawyers are willing to put time and
energy into this.”
