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Last year in California the headlines in many newspapers reported that a jury had issued a $90 million verdict against Farmers Insurance Exchange. Prior to this case there had been a number of settlements of lawsuits involving such companies as Rite Aid Corp. ($25 million), Albertsons ($37 million), Bank of America ($22 million) and Starbucks ($18 million). These cases had a common element: they all were class actions, under the Fair Labor Standards Act (FLSA), brought by workers against their employers for unpaid wages or overtime. Do such lawsuits reflect a growing pattern of class action litigation involving wage-hour laws? The answer is probably, “Yes.” During 2001 similar complaints were brought against Aon Insurance Co. in Texas, OfficeMax in California, Ameritech, Wal-Mart and the May Department Store Co. Also, here in Connecticut federal district court Priceline.com Inc. and Aetna Services Inc. faced FLSA class claims. Overall, the number of court cases brought under the FLSA between 1998-2000 increased from 1,562 to 1,935, or approximately 25 percent. There have been an estimated 450 class action suits brought in the past five years. There is a two-step approach to bringing “collective actions” under the FLSA. In the first phase the pleadings and related court filings must identify the proposed class and provide some indication that the class members are “similarly situated,” based on their wage claims, job duties and responsibilities. If the court conditionally certifies the class, potential class members are given notice and the opportunity to “opt in.” The second phase of an FLSA collective action determination occurs after discovery is nearly completed. The court then makes a factual assessment, based on all of the available evidence, whether or not the claimants are actually “similarly situated.” If so, then the case may proceed to trial. In the Aetna Services case in Connecticut, the approved class consisted of Systems Engineers responsible for the installation and support of the company’s hardware and software technologies. Is there an explanation for the rapid growth in FLSA class action litigation? Actually, there are a number of factors that may contribute to this development. In the past dozen years or so, the federal government adopted a more aggressive enforcement posture towards wage and hour violations. It was not uncommon for employers to find that they were out of compliance with the FLSA or corresponding state laws. More and more workers discovered that they had potential claims for overtime, despite the fact that their employer classified them as salaried, exempt employees. Another reason is that ambitious lawyers saw the advantages of bringing class actions, and they pursued this strategy. Once the first few lawsuits were filed, they were followed by reported settlements of some cases, and the word traveled quickly among the plaintiffs’ bar. Whereas individual FLSA cases typically are not economically feasible because of high litigation costs spread over a long period of time, class action lawsuits can be quite lucrative since the number of claimants may rise into the hundreds and back pay can run as far as three years. A further cause behind this increased class action litigation, as well as with other individual wage hour cases, is that companies can easily get into trouble with the FLSA. Employers are required to distinguish between their exempt and non-exempt staff. The burden is on them to prove that certain jobs are lawfully exempt from overtime requirements. OLD LAW The FLSA was passed in 1938, and now, more than 60 years later, it can be difficult at times to apply the statute and FLSA regulations to many of the jobs that exist in our economy and within the tech sector in particular. Also, because of constantly evolving technologies and processes job responsibilities may change within a short period of time. Accordingly, a position that once may have been properly classified as exempt for overtime purposes, later may no longer satisfy the requirements of the FLSA regulations that cover the four basic exempt classifications. Companies should take specific measures to minimize their potential liability under the FLSA and state wage hour laws. First, employers must develop a working knowledge of the regulations that define the exempt classifications. There is still a misunderstanding within some sectors of the business community that as long as you call someone “salaried,” you are not required to pay them overtime. Second, there must be a clear grasp of the actual duties of the job(s) in question. The company may believe, for example, that an individual falls under the administrative salaried exemption and that he or she exercises independent judgment and discretion in the performance of their duties. However, if the reality is that the person mostly performs clerical functions, then there is a great likelihood of an FLSA violation. Accurate job descriptions also are a necessity, and they should be reviewed and revisited periodically to ensure that they conform to the provisions of the FLSA regulations. Finally, companies must monitor their pay practices to avoid the risk of violating the “salary-basis” test that applies to all of the FLSA exempt classifications. Briefly, this means that exempt employees must receive a fixed amount of compensation weekly, regardless of the number of hours they may work during the period. Besides the few exceptions that are identified in the regulations, employers may not dock exempt individuals for any fluctuation in their work schedule. The penalty for violating the FLSA “salary-basis” test is the complete loss of exempt status. This may apply not only to the individual whose pay was docked, but also to all other employees in the same salaried classification! Back pay liability may run for a full three years if the violation is deemed willful. Peter A. Janus is the Editor ofConnecticut Labor & Employment Law, published by theConnecticut Law Tribune, and he is a principal in the law firm of Siegel, O’Connor, Zangari, O’Donnel & Beck, P.C. ( www.siegeloconnor.com) in Hartford, Conn.

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