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Thursday, Jun 1, 2023

Wage, Hour Issues Deluge Employers and Lawyers

An employee files a complaint claiming she was denied a meal break, and before you can choose a snack from the break room vending machine, you’re looking at a class action lawsuit and the potential for thousands, if not millions in liabilities. Wage and hour issues have become the hottest button in law, sending attorneys into overdrive to audit practices, write handbooks and run seminars in hopes of warding off any potential trouble for their clients. The reason? Even a single infraction can result in hundreds of claims, and failure to provide even a 10-minute break can add up to hundreds of hours and thousands of dollars in penalties. “It is the hottest topic of all employment law,” said Robert A. Levinson, a partner at Levinson Arshonsky & Kurtz LLP in Encino. “There are more wage and hour suits being filed now than all the discrimination complaints combined. It is the area of which employers are most concerned.” In September, Smart & Final Inc. reached an agreement to settle a class action lawsuit concerning overtime pay, meal and rest periods and other compensation that involved some 13,000 potential class members and led the L.A. retailer to record a pre-tax charge of $19 million for its third quarter, monies it set aside for payments, although the company denied wrongdoing. At about the same time, a federal court certified a class action lawsuit against home improvement chain Lowe’s that could involve as many as 75,000 workers who, the suit charges, were denied overtime pay. A similar case against RadioShack Corp., which could involve as many as 7,000 current and former employees, is expected to go to trial in February. The cases mostly revolve around how employees are classified with respect to overtime pay and meal and rest breaks. Recently, courts have ruled that a whole range of employees, including stock brokers, graphic artists and store managers, who have traditionally been exempt from overtime pay, should, in fact, be classified as non-exempt workers entitled to overtime when they work additional hours. Even when a small amount of pay is involved, as with meal breaks, the liability is typically multiplied by months, if not years, and by many employees, amounting to considerable amounts of money. Added to that, these infractions carry automatic liability to pay the fees for the plaintiff’s attorney, multiplying the charges an employer can incur even more. And the cases are not limited to huge, national companies. “In today’s environment, there are many small firms who, if hit with a suit like this would have trouble,” said Ira Rosenblatt, managing partner at Stone, Rosenblatt, Cha in Woodland Hills. “The cost to defend them is tremendous. Somebody else says me too, and pretty soon you’ve got, not a formal class action, but you’ve got a dozen employees and it’s tantamount to a class action.” Several factors are stirring up these cases, not the least of which, attorneys say, is that the rules for such labor practices as meal breaks and classifying employees as supervisors exempt from overtime are unclear, leaving much room for interpretation. Using the Internet The Internet has made it relatively easy, not only to find other employees who felt they were wronged by the company, but also to mobilize plaintiffs. “If you type in wage and hour class action or overtime class action, many of the hits you receive are from law firms that are trying to represent employees for a particular company, and they post information on the Internet,” said Joan B. Tucker Fife, who specializes in representing employers in single-plaintiff and class action employment litigation for Winston & Strawn LLP in San Francisco and has lectured and written extensively on the subject. “So it’s a very effective tool for plaintiffs’ lawyers to develop information quickly about a particular company or industry and use that to satisfy the minimal pleading requirements for class action.” At the same time, many more attorneys are believed to be seeking out these types of cases. Over the past 10 years, as insurance companies began to staunchly defend against personal injury cases, the settlements became smaller, driving the attorneys who traditionally handled those cases to move into other practices. “Because of the anti-business legislation passed, it became very easy to sue California employers,” said Levinson, “and you had attorneys looking for work and finding a new practice area.” Revisions to the labor code enacted in the past year now allows employees to act on behalf of other employees in bringing these suits, making it much easier to develop class actions. “My message is to be educated and aware so you don’t step into a deep hole that you don’t see,” said Richard Rosenberg, founding partner and specialist in labor law at Ballard Rosenberg Golper & Savitt LLP in Universal City. Indeed, attorneys who represent employers say that even when their clients believe they have a solid defense, the nature of these suits makes them extremely expensive to fight, and the best offense is to be proactive in developing policies and procedures and training management. Many attorneys have been called in to perform audits of the firm’s policies and practices. “We do a lot of corporate checkups to make sure they’re paying exempts correctly,” said Levinson. “I’m doing more and more handbooks. Smaller companies didn’t want to be bothered before. Now they’re doing it.” At Stone Rosenblatt Cha, Rosenblatt is also recommending that his clients buy employment practice liability policies now available for such situations. “I think it’s a reasonable expense and depending on the executives and the owner’s appetite for risk, I think it’s something they should be looking at,” Rosenblatt said.

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