In October 2001, Perdue Farms, Inc., a chicken processing company, paid $10 million to a group of its employees to settle a lawsuit. The suit was premised upon a simple, yet costly proposition: Perdue had failed to compensate its employees for the time that they spent putting on, taking off, and cleansing their sanitary equipment. This oversight, involving only a few short minutes out of every workday, cost Perdue $10 million. This settlement offers a straightforward, yet powerful warning to employers who do not give enough thought to state and federal wage and hour laws.
The recent surge of class action lawsuits brought under these laws demonstrates the precarious position in which many large employers find themselves. From Wal-Mart to Victoria's Secret, UPS to RadioShack, sophisticated and legally informed companies are finding themselves the targets of wage and hour class action suits. The grounds for these suits are as varied as the employers at which they are targeted.
For example, RadioShack managers in Pennsylvania have brought a class action suit under the FLSA (Fair Labor Standards Act) alleging that they are non-exempt employees to whom RadioShack has not paid overtime wages, despite the fact that they regularly worked overtime hours. This suit follows RadioShack's $29.9 million dollar settlement with managers in California for similar violations. FLSA overtime class actions are becoming commonplace, and employers are paying heavily for their passing attention to the Act's complexities.
Although wage and hour class action suits are most commonly brought under the FLSA, other suits have invoked state statutes as well as state common law. For example, Wal-Mart recently has been sued for failing to compensate employees who worked during their breaks and lunches. The employees claim that Wal-Mart breached a contract created by an employee handbook and representations made to them in a training seminar. Similar breach of contract actions have been brought to recover such things as commissions, accrued vacation and sick time, and other benefits.
These suits demonstrate that employers cannot afford to be complacent or inattentive in their compensation practices. Employers should be especially aware of overtime issues affecting their salaried employees. Employers cannot safely assume, for example, that an employee is exempt from overtime compensation merely because he or she is salaried. Employers who do not focus on the sometimes detailed regulatory rules of the FLSA could find themselves liable for millions in unpaid overtime compensation. Similarly, employers should be aware of state wage and hour laws and should examine their policies and handbooks to make sure that they are not unwittingly creating contractual obligations that could come back to haunt them. In short, many employers have already paid a large price for their inattention. It is imperative that employers understand wage and hour laws and then review their compensation policies and practices in light of those laws.