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October 21, 2008
New Cottage Industry--Suits over Small Wage and Hour Claims

By Steve Bruce

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There's a new breed of plaintiff lawyer out there, says attorney Phillip Russell, and they are not looking for the companies with 1,000 employees--they're happy to find 10 or 15 employees working off the clock or due unpaid overtime.

Russell is a member of the Tampa, Florida, office of national employment law firm Constangy, Brooks & Smith LLP. His remarks were delivered at BLR's Second Annual National Employment Law Update, held last week in Las Vegas.

Russell explains the new interest in small wage and hour cases. If you take ten employees, each owed 5 hours of overtime a week, for two years (or three years if the violation is "willful"), then double the back pay for liquidated damages, that makes it worthwhile for the employee to bring a charge, and then the attorney gets his or her hourly fee for time expended on the case--not a percentage as with most contingency arrangements. So the employee might get $10,000 but the attorneys' take could easily amount to as much as $100.000.

In addition, says Russell, remember that for a Title VII claim, you have to have 15 employees, but for wage and hour Fair Labor Standards Act violations, just one employee is enough. What it means is that companies of nearly any size (with a minimum $500,000 in revenue) are vulnerable to lawsuits.

Russell then delivered his tips for staying out of trouble in wage and hour.

Is the CEO Owed Overtime?

Every employee must be paid overtime unless he or she falls into one of the exemption classifications, says Russell. Here are more common misconceptions he hears often:

  • "We pay everyone in the office on a salary basis." That's just not possible, says Russell. Remember that titles don't mean anything. In these situations, someone is non-exempt.
  • "We don't have to pay overtime because we pay salaries." Again, this will not fly. Unless the people are exempt based on one of the exemption categories, they are owed overtime.
  • "Our system Automatically Deducts for Meal Breaks." Many employers let their timekeeping systems automatically deduct for breaks or meal times. This is dangerous, says Russell. Invariably, your system will deduct time that the person is working.
  • "We don't have to pay overtime as long as people only work 80 hours in a two-week period." No, says Russell, don't try that one. The law requires overtime to be calculated on a weekly basis. So if that 80 divides 30 hours one week and 50 hours the next, you owe 10 hours of overtime for the second week.
  • "Our construction estimator is exempt." Many jobs sound as though they might qualify for the administrative exemption, but don't. For example, construction estimators, controllers, and customer service reps. If their jobs are routine, for example, just plugging numbers into a spreadsheet, or reading answers off a prepared script. they are probably non-exempt, Russell says. However, working supervisors like call center managers, nursing home supervisors, and foremen, may qualify for exemption if they are part of decisions, decide when they switch to performing nonexempt duties, and remain responsible for the success or failure of business operations.
  • "Our telecommuting sales people qualify for the 'outside sales' exemption." To get the outside sales exemption, an employee needs to be on the road, Russell says. He saw an ad that read "Inside sales, $30,000 annually." "I don't think so," said Russell. There's no exemption there; it's probably hourly work with overtime required.

Pay close attention to wage and hours issues, says Russell. If you don't, you'll be calling him for help defending against the inevitable suit and charges.

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