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Longer hours lead to lawsuits over pay

By Fay HansenSpecial to The Christian Science Monitor / July 1, 2002

With its name still fresh on Fortune magazine's "best places to work in 2002" list, Starbucks Coffee Company announced in April that it will pay up to $18 million to settle a lawsuit filed by more than 1,000 angry managers of its California stores.

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The managers claimed they were forced to spend long hours doing nonmanagerial tasks but were denied overtime pay.

As the US workweek grows longer, overtime-pay issues are heating up.

Retail giant Wal-Mart finds itself embroiled in a legal battle involving allegations of unpaid overtime by hourly workers.

In May, the Labor Department filed a lawsuit against Tyson Foods, Inc. to recover back wages for workers who were not paid for time spent putting on and taking off work clothing and protective gear.

Other high-visibility companies are now spending millions of dollars to settle cases brought under federal and state laws that require overtime pay for such "nonexempt" employees.

And overtime has become an issue at higher levels. Managers, professionals, and office and sales workers are challenging employers who classify them as "exempt" employees beyond the reach of federal and state overtime-pay provisions.

The federal law governing overtime pay, the Fair Labor Standards Act, is enforced by the US Department of Labor, and any employee can touch off a federal investigation with one call.

A growing number of white-collar workers are picking up the phone.

"Misclassification of employees under the FLSA is rampant," says Charles T. Huddleston, a partner in the law firm Arnall Golden Gregory LLP in Atlanta. The price employers pay "for misclassifying employees can be up to two years of unpaid overtime, doubled by statute, plus attorneys' fees."

Who qualifies as 'exempt'

There are four white-collar exemptions to the minimum-wage and overtime requirements of the FLSA: executives (managers), administrators, professionals, and outside sales representatives.

"To be exempt, an employee must fall under one of these categories and be paid on a salary basis," says Rob S. Ghio, partner and head of the employment-law group at the firm Arter & Hadden in Dallas.

The exemptions hinge on the actual duties performed, however, not on the job title or method of payment.

"Exempt workers manage, think, direct, supervise, and establish," says Neil Martin, a partner in the labor and employment section of Houston law firm Gardere Wynne Sewell. "The more routine the task, the more mundane the assignment, the more manual the work, the less is likely that the workers are exempt."

More than 60 percent of the job growth over the past decade was among employees classified as managers and professionals, jobs in which long workweeks are considered typical.

Nearly 30 percent of managers and professionals work 49 hours a week or more, according to the latest data from the Bureau of Labor Statistics. Employers often toss these employees, along with administrative and sales workers, into the exempt classification, regardless of the actual tasks they perform.

What you do vs. what you are

The most common overtime pay complaint today rests with the white-collar classifications, and employers are losing more of these cases. Last year, Rite Aid Corp. paid $25 million to 3,000 managers and assistants. Bank of America Corp. settled with some 6,000 personal assistants for $22 million.

Employers may forget that "the law looks beyond form to substance," notes Linda Usoz, an employment attorney in the San Jose office of Coudert Brothers. "Calling an employee a 'senior advisory engineer,' or some other title that connotes management, does not make the position exempt."

Last Year, Pacific Bell paid $35 million to settle a suit by 1,500 engineers who alleged they worked 50 hours a week but were paid for only 40.

"One red flag is if an employee works alone and does not exercise independent judgment. Such employees may very well be hourly employees and entitled to overtime pay," says Robert Skousen, head of Los Angeles law firm Skousen & Skousen.