The ins and outs of employee lawsuits can be easily researched by the most vindictive or unscrupulous employee – or the most unfairly treated!
I hope to have caught the CEO’s attention by attaching this creepy headline lure — a little scare tactic to reinforce that yes, it is what you don’t know that can hurt you, particularly if that disgruntled employee DOES know. And if that employee routinely reads a newspaper, they may be well aware that employers spent nearly $500 million settling wage-and-hour lawsuits at both the state and federal level last year, mostly due to compensation rules that are too often misunderstood or misapplied even by the most seasoned H.R. professional.
That established, let’s start at ground zero and level the lawsuit playing field by revealing some startling facts.
“Salaried employees” may well be entitled to overtime pay
Salaried employees are exempt from overtime pay, but the key is properly defining “salaried” employees. To qualify for exemption from overtime, employees generally must be paid not less than $455 per week on a salary basis, with some exceptions. According to the U.S. Department of Labor Wage and Hour Division, “A ‘salary basis’ means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis.
Here’s what you might not know: “The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work. An exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.” Also note that “If the employer makes deductions from an employee’s predetermined salary, i.e., because of the operating requirements of the business, that employee is not paid on a ‘salary basis.’ If the employee is ready, willing and able to work, deductions may not be made for time when work is not available [Rethink making employees take vacation days for “Snow Days” or other business interruption times].”
If you lose the exemption status for a worker due to having made a practice of making improper salary deductions, you will be fighting an uphill, very expensive “back pay” battle in court for all similarly affected employees.
A non-exempt worker’s pay may begin to accrue before they actually start working
Workers are entitled to “stand-by time” which is usually defined and settled to the benefit of the employee. For example, employees at the Oscar Mayer meat processing plant in Davenport, Iowa filed a class action lawsuit seeking compensation and back pay for time spent putting on and taking off their safety equipment – uniforms, safety footwear, hard hats, hairnets, glasses and other equipment. The attorneys for the four plaintiffs in the case sought to represent a class of 1,750 employees at the plant, naming Oscar Mayer’s parent company, Northfield, IL-based Kraft Foods Inc. Kraft spokeswoman Rachel Larsen responded that the company believed it was in full compliance with state and federal law. Similar company lawsuits were then filed in Naperville, Champaign, Chicago, and Granite City in Illinois and the Oscar Mayer plant in Madison, Wisconsin. To what result? In the last case alone, about 1,300 current and former employees, dating back to mid-2005, prevailed and shared about $4 million in back pay, said attorney Jim Olson, of the Lawton & Cates law firm, which initiated the class-action lawsuit in 2007.
The U.S. Supreme Court refused to hear Kraft’s appeal – despite its seasoned H.R. team and expensive attorneys. The High Court has stated that the test to determine whether or not an employee needs to be compensated for stand-by time is whether the time is spent predominantly for the employer’s or employee’s benefit. So when in doubt, err on the side of extra pay for the employee.
Don’t substitute comp time for overtime pay
According to the FLSA, an employer is required to pay non-exempt employees one-and-a-half times their regular rate of pay for hours worked over 40 in a single work week. Period, end of bargaining rights. An employer cannot (and should not) pay comp time in lieu of overtime pay — even if the employee requests it. In the public sector, this choice does exist; state and federal workers have the option to choose between the two. However, private sector employers must stay away from the temptation to exchange one for the other until this political hot potato wins the support of both the House and the Senate – which it has not yet accomplished. In the meantime, the exchange is illegal. If you offer flex time, make sure to track hours so that workers are not accruing more than 40 hours total in a given week or, oops, you owe time and a half.
If employment law today resembles rocket science, well, it is complicated. The best defense is routine “Duty of Care” training for managers as well as H.R. directors, as many of these mistakes fall within a manager’s authority and mistakes most often happen almost as a knee-jerk response to a situation. Ignorance of the law is not defensible, so put your company’s money where it will do you the most good: in preventative training.