White Collar Wage Wars

There has been an exponential boom in the amount of cases being filed against corporations.  In 2006 and 2007, the likes of Citigroup, UPS, IBM, Sony, and Carnival Cruise Lines paid out over $260 million in settlements for unpaid overtime cases.  While overtime lawsuits are not new, multi-million dollar settlements have been in the past a rare occurance.  Now, Fortune 500 companies are scrambling to pay settlements.  So what has changed?  Simply put:  the clients.  White collar employees are the new client du jour for plaintiff attorneys.

In 1938 Congress passed a law mandating overtime pay for workers.  Within that law, Congress carved out a number of exemptions.  In particular, employees that exercise “independent judgment” or operate outside of the place of business are exempt.  Additionally, executives and those requiring advanced training or a professional degree are also exempt.  For decades, managers, administrators, and “white collar” workers were often classified as exempt from overtime.  Employers and employees both came to an unspoken agreement on the issue.  Recently, though, attorneys have made persuasive arguments to require overtime for these previously exempt groups.

Traditionally, a Starbucks manager would be exempt as they would be considered an executive with the authority to hire, fire, and promote.  However, in today’s workplace, these managers are often required to spend more time serving than supervising.  Even a CPA that exercises his own judgment as a CPA may avoid the exemption.  In an ongoing case, Ernst & Young accountants and staff have initiated a class action lawsuit over overtime payments.  While the employees would normally be prohibited from collecting overtime, their job is often simply gathering audit information and data entry.  The “independent judgment” they are supposed to have is often greatly curtailed by rules and assignments from the company.  In theory, such a worker would not be classified as a professional, and thus exempt from mandatory overtime.

Across the country, the old rules are being found to not apply to the modern workplace.  Managerial titles and professional degrees are no longer enough to exempt employees from mandatory overtime.  Instead, courts are looking at the substance of their employment, and plaintiff’s attorneys are targeting specific actions employees are performing during the workday for overtime pay.  For example, in the event that a business has an employee clock out, and then complete a task regarding inventory, or finish the close up procedures, plaintiff attorneys have found a niche. While it may only take 30 extra minutes that day, that time aggregated over months and combined with thousands of other employees creates class action lawsuits in the millions.  Similarly, computer workers and IT employees have often been an exempt class due to their independent judgment and higher education.  However, attorneys have successfully made the argument that while an IT worker can write their own code, the implementation of the code is at the behest of someone else.  Merrill Lynch, Morgan Stanley, and A.G. Edwards have all settled claims due to technical violations of the law when paying stock brokers on commissions only.

The success of the cases in court can be hit and miss, but the corporations often would rather settle than drag it out.  By targeting white collar employees, overtime pay that is 50% more than their normal hourly becomes very lucrative, very quickly.  Combining the overtime with the desire to settle creates a perpetual incentive for attorneys to target these types of cases.  The only thing holding back more of these cases is the relative ignorance of both employers and employees on this issue.  The majority of the cases only come to light when an employee is complaining about something unrelated.  The workplace stereotypes often play against the sense of overtime entitlement.  Already, though, such stereotypes are falling away as more cases are filed and more multi-million dollar settlements are agreed to.

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