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The practice in some large corporations of handing out titles without substance is at issue in a spate of recent class actions, including one currently being heard in Santa Clara, Calif., Superior Court. Plaintiffs contend the corporate behemoths — including local employers Taco Bell and Wal-Mart — promote hourly employees to assistant manager slots simply to avoid paying overtime. In the current Santa Clara case, Mohsin Mynaf v. Taco Bell, CV 761193, 3,000 workers across California are asking for overtime pay and damages for what they call unfair business practices. In court documents, plaintiffs’ attorneys estimate employees are owed damages in the millions. Milberg Weiss Bershad Hynes & Lerach represents the plaintiffs; Pillsbury Winthrop is representing Taco Bell Corp. The suit asks for overtime pay and damages for unfair business practices, including intentional spoliation of evidence. In Orlando Sandoval Jr. v. Wal-Mart, CV793224, filed in Santa Clara County, the plaintiff said he was promoted to assistant manger and given a salary, but still spent the majority of his time doing work that hourly employees were doing. Because of his new title, Sandoval said, he wasn’t eligible for overtime even though he worked it. “They are spending 90 percent of their time doing what hourly employees are doing,” said attorney Robert Coleman of Rancho Cucamonga, Calif., who is currently handling seven employment class actions, including the one against Wal-Mart Stores Inc. “I think you have corporate America that just doesn’t realize what the law is in California, while in other states you can classify workers this way.” The feeding frenzy among plaintiffs’ attorneys has created large caseloads across the state, including 100 in Los Angeles County alone, where many are being considered for classification as complex litigation. Large corporate defendants in these cases include U-Haul, T.J. Maxx, Sport Mart Inc. and Wendy’s. Similar suits were settled for $11.3 million against Mervyn’s and $7.5 million against Ross Dress for Less. Attorneys on both sides agree that these types of employee misclassification cases have become extremely common during the last few years, especially against large national corporations that aren’t familiar with the nuances of California labor laws. “One reason they’ve become so common is because they are very successful cases. The plaintiffs’ bar has rediscovered the California Labor Code,” said David Borgen, a partner with Saperstein, Goldstein, Demchak & Baller. Last spring, Borgen won several hundred Rent-A-Center Inc. employees a $3 million settlement in a misclassification class action. “I think it is an area where many employers can be caught unaware by California requirements because they are different than federal requirements,” said Diane Kimberlin, a partner with Littler Mendelson in Southern California. Kimberlin represented Ross Dress for Less in a class action suit in Southern California. Ross settled the case for $7.5 million. Under California law, “executive” employees are exempt from overtime compensation, Kimberlin said. Executives have discretionary authority over employees, regular supervision of at least two workers, and must spend more than 50 percent of their work time devoted to “managerial duties.” “California applies an arithmetic test. It’s quantitative,” Kimberlin said. “They total up the minutes. Fifty percent of work needs to be managerial.” Kimberlin said it’s impossible to generalize about the validity of the class actions, but takes issue with the way they’re certified. “It takes a meat-cleaver approach to what should be handled with a scalpel,” Kimberlin said. When courts certify the suits, this means attorneys on both sides spend hundreds of hours applying California’s formula and figuring out how much employees may be owed, Kimberlin said. Companies, realizing that legal bills will cost more than the back pay, often quickly move to settle these cases. Kimberlin said companies often don’t keep the kind of detailed records needed to prove they are complying with the law. These factors make misclassification suits a calculated risk for plaintiffs’ attorneys, who can expect to collect 20 percent to 30 percent of multimillion-dollar settlements. But attorneys say these cases are very labor-intensive and drawn out. “You have to be willing to stand the long haul. You can find yourself in a protracted three- or four-year litigation with appeals,” Coleman said. “These cases can take up to 10 years.” Coleman said the sharp increase in these types of class actions isn’t because attorneys have been recruiting clients. Rather, potential clients first seek the attorneys out for other employment or family issues. “In society there is a problem with families because there are people working out of the home for long periods of time,” Coleman said. “They go to the legal system to work out the family problem, and they figure out there is a financial situation that needs to be corrected.”

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