Wage and Hour Cases in the News

Posted on August 11, 2009 by Patrick Smith

Employee Availability After Hours Comes at a Price

The Wall Street Journal reports on a potential boom in lawsuits relating to unpaid overtime.  The culprit--company issued smart phones combined with lean workforces requiring fewer employees who handle more responsibility.   With new technology, employees are capable, and often expected, to handle work related communication anytime and anywhere, whether they are off the clock, sick, or on vacation.   The article reports on two recently filed lawsuits claiming unpaid overtime under the Fair Labor Standards Act (FLSA) .  In one case, retail employees of T-Mobile USA claim they were required to use company issued smart phones to respond to messages and customer complaints after hours.  In the second case, a maintenance employee for CB Richard Ellis alleges he was not paid for after hours time spent sending and receiving messages on his cell phone.

Under the FLSA, whether an employee is who is required to carry an employer issued mobile phone, pager, or smart phone after hours remains on the clock depends upon many factors, including the nature of the job and how frequently the employee actually has to use the device for work related purposes.   Depending upon the number of employees involved, failure to comply with FLSA's overtime requirements can result in substantial financial liability.  To avoid running afoul of these overtime requirements, prudent employers are urged to develop clear practices concerning employee's use of company issued technology.

Company Officers May Be Held Personally Liable for Unpaid Wages

A bankrupt company does not necessarily relieve corporate officers of liability for unpaid wages under FLSA.  So held the U.S. Court of Appeals for the Ninth Circuit in Boucher v. Shaw, decided on July 27, 2009.   In Boucher, a group of former employees of the bankrupt Castaways Hotel, Casino, and Bowling Center in Las Vegas sued the CEO, Chief Financial Officer, and manager in charge of labor relations, claiming the individual officers and managers were liable for their unpaid wages.  Rather than getting in line with other creditors in the bankruptcy proceedings, the plaintiffs decided to pursue the officers individually.

The Court noted that the definition of "employer" under FLSA is not limited by the common law understanding of the term, but "is to be given an expansive interpretation in order to effect FLSA's broad remedial purposes".    The test, according to the Court, is whether the individual exercises "control over the nature and structure of the employment relationship", or "economic control" over the relationship.   In this case, the Court noted that the CEO held 70% of the company shares, the manager in charge of labor relations owned 30%, and the CFO had responsibility for cash management.  Under these facts, the Court held the plaintiff's stated a claim against the individuals under FLSA.   The Court rejected the defendants' argument that any claims for unpaid wages by former employees belonged in the bankruptcy court. 

While there is no similar precedent in the Eighth Circuit, the Boucher case nonetheless should put company officials on notice that wage claims may exist against them individually, even after the corporation is bankrupt or otherwise defunct. 

 

 

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What's New This Week

Posted on August 3, 2009 by Patrick Smith

As we enter the traditional "dog days" of summer, the world of labor and employment law remains active.  Here are are some highlights of important and interesting news this week:

1.   Furloughs

Although there is some indication the recession is easing, many employers remain concerned about the economy.    Pay reductions and temporary furloughs provide a means by which employers can manage payroll expense while still retaining valued employees.   As we discussed in this post a couple of months ago, however, it is important to plan ahead and understand how the wage and hour laws impact your ability to use furloughs with certain types of employees.  To help employers comply with the wage and hours laws as they relate to furloughs, the Department of Labor Wage and Hour Division recently issued a memo containing many of the frequently asked questions posed to the Division.  The memo is available on the DOL website, or can be accessed here.

Employers are urged to access the DOL memo or consult with counsel before implementing any kind of furlough program, particularly if it involves exempt employees.

(Hat tip: Florida Employment and Immigration Law Blog)

2.  Other Wage and Hour Issues in the News

Speaking of wage and hour problems, the convenience store chain QuikTrip, which has a substantial presence in Iowa, recently agreed to pay 3,800 employees approximately $750,000 in back pay.   A Department of Labor Investigation revealed that the employees had not been paid an overtime premium that was due on certain performance related bonuses.  QuikTrip blamed a computer glitch for the error.  Details of the story can be found here.  

Lesson: it might be wise to audit payroll systems from time to time to ensure your employee records and payroll systems are up to date and accurate.

3.  Proposed EFCA Compromise Is Still Bad News for Employers

As a means of garnering the support of some reluctant Senators, promoters of EFCA have proposed removing the "card check" provision in law the law that would have permitted union certification without a secret ballot election.   For a discussion of the current state of EFCA, including the recently proposed compromise, see Justin Wilson's post here.  However, even in its compromise form, EFCA is still a bad deal.   Even though union interests may be willing to give up on card check, at least for now, they still are demanding the opportunity to hold an election in a shorter period of time after a petition is filed with the National Labor Relations Board than is currently available.   That means employers will have less time to provide information to their employees in response to a union campaign.  Moreover, the binding arbitration requirements of EFCA remain in the compromise legislation, which will provide an incentive for union negotiators not to compromise during the early phases of a negotiations, with the expectation an arbitrator will grant more union demands than would have been granted as part of a good faith negotiating.

 

 

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Proceed with Caution When Considering Employee Furloughs

Posted on June 3, 2009 by Patrick Smith

Many businesses in Iowa and elsewhere continue to experience slack demand, lower revenue, and low to non-existent profits.   Economic indicators in Iowa continue to sink.   As a means of trimming payroll expenses while avoiding long term or permanent lay-offs of employees, many employers are looking to voluntary or even mandatory unpaid furloughs.  

Employers should be cautious when implementing an employee  furlough program, particularly when it involves furloughs of professional or administrative employees who are paid a set salary regardless of the number of hours worked.   Such employees are considered "exempt" under the federal Fair Labor Standards Act (FLSA) because they are not entilted to overtime in the event they work more than forty hours per week.   On the other hand, if such an employee works less than forty hours per week because of reductions in business, the employer's right to pay the employee less than his or her regular salary is limited.   

A recent opinion from the Department of Labor purports to clarify when an employer may deduct from an exempt employee's salary because of time off work.   Generally speaking, an employer that requires exempt employees to take mandatory furloughs cannot reduce the employee's pay unless the furlough last at least one week.   Exempt employees who are required to take furloughs of less than one week are still entitled to receive their full salary.  

If the employee's leave of less than one week is truly voluntary, his or her salary may be reduced by an amount proportionate to the time off work (i.e. if the employee takes one day off, the salary paid can be 4/5 of the regular salary).  However, the employee must be off work a minimum of one full day.  In other words, if the exempt employee works part of the day and is off the rest, the employer may not reduce the employee's salary to account for the time off.    It is also critical to note that the employee must be completely free of any obligation to work on the day off--even a requirement to check voice mail or e-mail may trigger the employer's obligation to pay the full salary.

The Department of Labor has promulgated rules on this subject, but the rules are complex and sometimes difficult to understand.  Employers are advised to seek counsel before making furlough decisions about exempt employees.

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