GO
Loading...

Court Battles Heat Up: 'I Want Overtime Pay'

Monday, 17 Jun 2013 | 2:00 PM ET
Emrah Turudu | E+ | Getty Images

A Chicago police officer sues to get overtime pay for using his BlackBerry when he's off the clock.

A New York lawyer sues his law firm in a class action suit alleging he put in more than 40 hours a week and didn't get paid for overtime.

Nine employees for Russell Stover Candies claim the Missouri-based firm mislabeled them as sales representatives and in doing so, deprived them of overtime pay.

And a Dallas stripper sues her former place of work—Baby Dolls— claiming she lap danced 40 hours a week without receiving minimum wage or overtime.

Those are just some cases making up the recent explosion of lawsuits filed by workers against their employers.

"Workers are becoming more aware of their rights," said Lou Pechman, an employment lawyer at Berke-Weiss & Pechman who has handled many of these cases for employees. "There have been some big judgments for workers, and it's natural for them to fight for themselves."

(Read more: Bank of America Paid Bonuses to Foreclose: Lawsuit)

"I saw very few wage issue lawsuits for the first 11 years of my practice," said Carolyn Richmond, a lawyer since 1994 and who works at Fox Rothchild,

"Usually it was worker discrimination cases, but the number of cases on wages has increased a lot over the past few years," said Richmond, who is counsel to the restaurant industry.

While the actual number of cases might seem low—some 7,764 over time lawsuits filed in the U.S so far this year, according to the Federal Judicial Center—the percentage has shot up dramatically.

Collective law suits in federal court alleging wage and hour violations increased some 400 percent from 2000 to 2011. The increase so far this year is 10 percent higher than last year, when 7,064 cases were filed.

Reasons Behind Lawsuits

Supreme Court Rules on 'Pay for Delay'
The FTC can challenge deals to keep generic drugs off the market, reports CNBC's Hampton Pearson.

Experts point to several reasons for the rise. But one of the main problems is how workers are classified.

"Employers often misclassify a worker, and that can make them exempt from overtime pay when perhaps they should get overtime" said Dan Eaton, a management professor at San Diego State University.

"For instance, someone may get labeled a professional on salary, and not qualified for overtime, when they are doing work non-professional duties," Eaton said.

Work rules in the U.S. are governed by the Fair Labor Standards Act (FLSA), first passed in 1938.

The FLSA established an 8-hour work day and 40-hour week, along with prohibiting the employment of minors. It also states that workers must be paid a minimum wage, and overtime pay must be one-and-a-half times regular pay. The FLSA has rules establishing classes of workers on who or who should not get over time pay.

(Read more: Supreme Court: 'Pay-to-Delay' Generic Drugs Can Be Illegal)

For instance, here are the rules for what the FLSA terms as a "Highly Compensated worker": Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

The classifications have been updated to reflect recent jobs, like IT workers, artists and online journalists. but they aren't clear enough, said Eaton.

"There is still a lot of gray area. It's not black and white," Eaton explained. "I don't think companies are trying to take advantage of misclassifying people. But in some firms, a CEO's secretary might be exempt from overtime and in other firms, she would not."

But adding to the problem for workers, said UCLA management professor and labor consultant David Lewin, is a changing business model that some firms are using to their advantage.

"In today's economy, companies are moving a lot of decision-making to the central office and leaving store managers, who are salaried and exempt from overtime, with nothing to do as managers," Lewin said, "And they end up doing the work of their hourly employees."

"Some companies know this and try to save money that way," Lewin said.

Lawyers Driving the Suits?

Richmond sees a changed economy—and her own profession—behind the recent spate of lawsuits.

"We moved to a service economy from a manufacturing one and that's brought more low-paying jobs," Richmond said. "There are a lot more workers in those jobs who are worried about their pay."

"And lawyers themselves have seen the changing demographics and [are] moving to take these cases. more so than in the past," Richmond added. "As a lawyer on the other side, I think some of them are frivolous."

Pechman, who in 2009 won a $3 million class action suit against Sparks Steak House in New York over shorting tips for waiters, said lawyers are just doing their jobs. (One of the plaintiffs in the case is suing the steak house for alleged wrongful termination because of his participation in the lawsuit. Pechman is the attorney for the plaintiff.)

"We're finding incredible non-compliance with FLSA laws, so using lawyers' over-involvement is a bit of a red herring," said Pechman.

(Read more: Monsanto Wins Court Battle Against Organic Growers)

Winning these types of cases, from the defendant side, is not easy, said Richmond.

"My clients call me the grim reaper because I usually tell them we can't win the case," Richmond explained.

"For instance a worker at a restaurant says they're due overtime, but they didn't punch their time card correctly after being told to do so over and over again," Richmond said. "The manager has to go back and figure it out. The burden is on the employer to prove the right time. It's usually just too expensive to fight."

Recent decisions point out the cost. Cable television installer Bowlin Group was required to pay almost $1.1 million in back wages and damages for misclassifying 196 employees as independent contractors, the U.S. Department of Labor announced last month.

Also in May, employment agency Hutco agreed to pay $1.9 million in back wages to 2,267 employees assigned to work sites throughout Louisiana, Mississippi and Texas.

More Court Battles Likely

Finding a way to tone down the legal back and forth won't be easy, said Dan Eaton.

"The courts seem to be deciding the outcome of the work laws," Eaton explained. "You've got state work laws and federal work laws in all this. It's just the system we have."

"FLSA needs to make things clearer," said Carolyn Richmond." It's hard for an employer to figure this out. The system doesn't help the employer at all. The burden should go back to the employee on proving overtime pay."

Until the rules change, or the courts change the way they've been doing business, these wage issue lawsuits will only increase, said David Lewin.

"This is going to be front and center for some time to come," Lewin said. "With workers feeling left out of the money in today's economy, it's a way for some of them to get justice."