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Wage and Hour Claims Continue To Plague Employers

Background

Seven years ago the Farmers Insurancecase exploded on the scene, heralding an onslaught of multi-million dollar wage and hour verdicts and settlements. A California state court jury awarded a class of claims adjusters $90 million. After appeals, attorney fee litigation and accumulation of interest, Farmers “settled” the case in September 2004 for about $200 million.

One might have expected that widespread coverage of the result would lead employers to reevaluate their wage and hour practices to make sure that they were in compliance. No doubt many have done so, but the continuing stream of hefty verdicts and settlements shows that many employers still are not conforming their practices to the rules.

Recent Verdicts and Settlements

Here are six cases from the first six months of 2008 to illustrate the point:

A federal judge in San Francisco gave preliminary approval to a $7.7 million settlement for information technology support workers at Cadence Design Systems. The class members claimed not to have received overtime because they were misclassified as exempt employees. Higazi v. Cadence Design Systems, Inc., No. C-07-2813-JW (U.S. Dist. Ct. N.D. Cal. 2/27/2008).

A federal judge in Los Angeles awarded $5.2 million to reporters and salespersons for the Chinese Daily News. The reporters had been misclassified as exempt creative professionals. The salespersons were not exempt as commissioned employees. The employer had not paid overtime nor required the employees to take meal periods. Wang v. Chinese Daily News, Inc., No. CV-04-1498-CBM (U.S. Dist. Ct. C.D. Cal. 2/27/2008).

Smart & Final agreed to pay $3.5 million to settle a class action filed in a Los Angeles state court by hourly employees for unpaid overtime, off the clock work, and missed meal periods. The employer must also pay fees and costs of $1,050,000. (Smart & Final had paid $22 million to settle an overtime class action on behalf of other employees in 2005.) Meyer v. Smart & Final, No. BC361174 (L.A. Superior Ct. 5/30/2008).

The Coco’s restaurant chain agreed to pay a class of general, assistant and associate managers $1,965,000 to settle overtime claims. The employees claimed that they were improperly classified as exempt. Wilde v. Catalina Restaurant Group Inc., No. BC347513 (L.A. Superior Ct. 3/18/2008).

A Los Angeles jury awarded awarded a recycling center’s yard manager $525,475 for unpaid overtime, interest and penalties. He had been classified as non-exempt, although he spent more than half his time performing manual labor. The jury award included amounts for non-wage claims. Yi v. Pomona Valley Recycling Center, No. BC353168 (L.A. Superior Ct. 2/6/2008).

A private arbitrator awarded six dancers at a topless club $687,500 for the club’s failure to pay minimum wage, overtime, vacation or benefits. The club claimed that the dancers were independent contractors working under a dancer performance lease. Fuller v. 6630 Lankershim Inc., No. BC357064 (L.A. Superior Ct. 3/10/2008).

What You Should Do

The errors made by the employers in the six cases probably resulted from ignorance of the applicable rules. The errors were basic — mistakenly classifying workers as independent contractors when they were employees, mistakenly classifying employees as exempt when their job duties made them non-exempt, failure to pay overtime as required by California law, and failure to require employees to take their 30-minute meal periods.

We have distilled the most important rules into a two-page document entitled “10 Tips for Avoiding Wage and Hour Violations,” which is available here. For more detailed explanations of the rules, consult the resources listed below. If you want professional help to determine whether your practices are in compliance, contact us for a human resource audit.

Resources

Farmers Court of Appeal Decisions
A091134 (adjudication of non-exempt status) 3/5/2001
A096721 (appeal from jury verdict) 2/9/2004
A110274 (ruling on prejudgment interest) 1/24/2006
A110311 (plan of distribution) 3/15/2006

Fair Labor Standards Act
DOL FLSA Compliance Assistance
DOL Wage and Hour Division
DOL Wage and Hour Regulations

California Law
DLSE Policy and Interpretations Manual
DLSE Opinion Letters
IWC Wage Orders
EDD Employment Determination Guide