It Could Be Payback Time
Conn. to get more manpower to investigate wage complaints
By DOUGLAS S. MALAN
Connecticut employers shouldn’t be surprised if they are paid a visit in the near future by a federal investigator looking into possible violations of wage and hour laws.
Many employment attorneys agree that greater scrutiny is coming, as the U.S. Department of Labor adds 250 investigators nationwide. The move was prompted by a congressional report released this spring that said the department’s Wage and Hour Division “frequently responded inadequately to complaints.”
The urgency was ratcheted up even further this month when a national study found that employers are “regularly and systematically” not paying workers what they’re legally owed, either in overtime or minimum wage, under the Fair Labor Standards Act.
“There are employers making mistakes out there,” said Robert G. Brody, a management-side attorney in Westport. “The question is whether it’s evil intent or ignorance of the laws.”
Brody said the answer likely depends on the size of the company—whether it’s a larger company with a human resources department or a smaller mom-and-pop shop. Either way, as businesses continue to struggle financially, there is more incentive for employers to cut costs, sometimes illegally, some employee-side attorneys said.
A report released in early September by the National Employment Law Project, a workers’ rights group, offered a snapshot of what might be happening nationwide. The group surveyed 4,000 workers in low-wage industries in New York, Los Angeles and Chicago and found that in any given week, workers in just those three cities were losing more than $56.4 million due to labor law violations, such as the failure to pay overtime.
“We found [violations] in virtually every major industry in urban economies,” said Annette Bernhardt, co-author of the report and policy co-director at the National Employment Law Project.
Paul DeCamp, who was the chief law enforcer for the federal Wage and Hour Division in 2006-07, said the additional investigators will bring staffing to where it was 10 years ago, and Connecticut likely will get two or three new investigators. Connecticut currently has 10 investigators. DeCamp said that President Barack Obama’s administration is more focused on investigating government contractors that have committed wage and hour violations in the past.
That includes contract work in everything from defense to construction to the security provided on military bases, said DeCamp, now a Washington, D.C.,-based attorney for employment defense firm Jackson Lewis. “If you don’t know the laws in this area, you can’t help but to commit a violation,” he said.
Worker Classification
The same holds true for private employers, too.
One common complaint involves the classification of employees as exempt or non-exempt. Employees who are considered to be managers are exempt from receiving overtime pay. However, if it turns out that, regardless of their job title, the employees really have no managerial duties, the employer can be held accountable and forced to pay overtime.
Another potential pitfall is the use of independent contractors. Some companies define employees as independent contractors to save money on overtime pay and benefits. It can be a fine line, with disputes mostly turning on just how much control a company exerts over exactly what a worker does and when he or she does it.
FedEx has been embroiled in numerous lawsuits, including one filed by Connecticut plaintiffs, accusing it of misclassifying workers as independent contractors. Fellow delivery giant UPS was taken to federal court in California last month for allegedly misclassifying certain workers as exempt employees.
Attorney Daniel Schwartz of Pullman & Comley said the number of wage and hour cases he’s seen has remained steady for a couple of years. “We’ve seen some increased publicity about it,” Schwartz said. “We still see those cases, but it’s not as though we’ve seen a spike in the state.”
But Beverly Garofalo, the managing partner in Hartford for Jackson Lewis, said that spike may be coming. Her firm’s office has been busy this year litigating cases involving companies of all sizes. Wage-and-hour compliance “is definitely, definitely a hot topic,” said Garofalo, and misclassifying workers is the “one of the most common mistakes.”
Workers are eligible to recoup wages going back as many as three years, depending on the nature of the violation. The federal labor department reported that it recovered more than $185 million in back wages for more than 228,000 workers nationwide during 2008. Both of those figures are down from 2007 when about 342,000 workers received more than $220 million in back wages.
The Connecticut Department of Labor reported that it recovered $8.1 million in wages in the past year, an increase of more than $1 million from two years ago.
Wage and hour law is “a very technical area,” Garofalo said, “and even the very good, law-abiding companies misstep.”
Garofalo was preparing for a public-speaking engagement on wage and hour laws last week for members of the National Payroll Association.
“It’s something that every employer in every industry, regardless of what state they’re in, needs to be proactively working to address to make sure they’re in compliance,” she said. “That’s a huge part of what we’re doing, counseling employers to take preventative measures.”
Plaintiffs React
Anthony Pantuso, a Milford employee-side attorney, said the wage and hour cases he handles often go hand-in-hand with other complaints from workers, such as discrimination or wrongful termination claims. He said the exempt versus non-exempt disagreement “happens all the time. A lot of companies get it wrong.”
Pantuso noted recent cases in Oregon, Washington, D.C., and New Jersey involving the insurance industry and the question of whether auto damage appraisers are entitled to overtime pay when claims adjusters are not entitled to overtime pay.
“The general consensus of cases was making a distinction between auto damage appraisers and claims adjusters” and allowing overtime pay, Pantuso said. That could be a question ripe for discussion in Connecticut, he said.
Wage and hour work “has been fairly busy, and I don’t think it’s going to drop any,” Pantuso said. “There’s a little more awareness on the part of the workforce about these issues.”
Hartford employee-side attorney Richard Hayber is representing Connecticut workers in separate federal court battles against Rhode Island-based companies CVS and Ocean State Job Lot over the alleged misclassification of employees as exempt. Hayber said it comes down to employees being called “managers” when their job responsibilities were mainly stocking shelves, tracking shipments and manning the cash register.
He says a 11th Circuit Court of Appeals decision against North Carolina-based discount store Family Dollar last December gives him ammunition. In that case, the court affirmed a $35 million verdict in favor of 1,400 store managers who the jury determined spent a vast majority of their time performing manual tasks, such as stocking shelves.
In February, a New Jersey jury awarded $2.5 million to 343 employees of Massachusetts-based Staples Inc., who were misclassified as exempt employees. “These big national shops all seem to be following the same business model,” Hayber said.
Hayber has been handling such cases for about 10 years.
“Every year, [employees’ attorneys] would think the cases were going to go away soon because employers would comply with the laws,” Hayber said. “I don’t see them going away.” •
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