Lawyers in demand for wage-and-hour lawsuits

Susan J. Pannell, Associate Editor

“The law in its majesty applies equally to highly paid executives and minimum-wage clerks,” wrote Judge Mark Bernstein of the Philadelphia County Court of Common Pleas in an October order requiring Wal-Mart Stores, Inc., to pay $62 million in statutory liquidated damages to employees in a class-action wage-and-hour lawsuit.

The order increased Wal-Mart’s liability in the case, brought by employees forced to work off the clock and denied rest breaks, by adding to the $78.5 million a jury had awarded earlier. (Braun v. Wal-Mart Stores, Inc., No. 3127 March Term 2002 (Pa., Philadelphia Co. Ct. Com. Pl. Oct. 3, 2007); decision below: Braun v. Wal-Mart Stores, Inc., 2005 WL 3623389 (Pa., Philadelphia Co. Ct. Com. Pl. Dec. 27, 2005).)

Wage-and-hour cases—brought under the federal Fair Labor Standards Act (FLSA) or analogous state laws (the Wal-Mart case involved the Pennsylvania Wage Payment and Collection Law)—involve claims that hourly employees were not paid for the work they did. Typical allegations include that employees were forced to work without recording (and being paid for) their time or were misclassified as exempt from the law’s coverage and denied time-and-a-half pay for overtime hours.

The wage-and-hour litigation field started to heat up around 2001—and now is practically on fire. The number of FLSA cases filed in federal district courts more than tripled in the past few years, from 1,920 cases in 2000 to 6,754 cases in 2006, with the biggest jump from 2004 to 2006, according to statistics compiled by the Administrative Office of the U.S. Courts.

Many of the cases were FLSA collective actions, which aggregate the claims of hundreds or thousands of “similarly situated” employees. Those filings increased by 77.5 percent over the first half of the decade—a figure that does not take into account additional cases that were amended to add class claims after filing, or any state-court filings.

Plaintiffs are increasingly looking to private lawyers and the courts—rather than the government—for relief. The Department of Labor (DOL) Wage and Hour Division reports a 13.6 percent drop in back-pay (minimum-wage and overtime) complaints brought to the government in 2005-2006, following an increase of only 4.4 percent over the entire 2001-2005 period.

Trial and appellate court judges have been busy considering the complex issues that these cases raise. Here’s a sampling from the past year alone:

The Third Circuit reversed a jury’s judgment for Tyson Foods, Inc., and remanded a lawsuit by poultry-processing employees who weren’t paid for the time that they had spent putting on and taking off their safety and sanitation clothing.

The court of appeals held that the jurors were erroneously instructed that for an activity to be considered “work,” it had to involve physical or mental exertion. Instead, jurors should have been told to decide whether the workers engaged in activity that was required by, or for the benefit of, the employer. The court also indicated that it would look closely at a finding by the district court that the time was de minimis, involving only “trifles.” (De Asencio v. Tyson Foods, Inc., 2007 WL 2505583 (3d Cir. Sept. 6, 2007).)

In an ongoing action, a Florida federal court refused to decertify a class of 900 Starbucks managers who are alleging that the company improperly classified them as executives, exempt from the overtime pay rules, when they are really “glorified baristas.” (Pendlebury v. Starbucks Coffee Co., No. 04-80521-civ-Marra (S.D. Fla. Sept. 20, 2007).)
Family Dollar Stores, Inc., is appealing to the Eleventh Circuit court a $32 million judgment in FLSA overtime claims brought by 1,400 store managers. The court of appeals denied the U.S. Chamber of Commerce’s request to file an amicus brief urging decertification. (Morgan v. Family Dollar Stores, Inc., No. 07-12398-DD (11th Cir. Aug. 30, 2007); decision below: Morgan v. Family Dollar Stores, Inc., 2006 WL 1388201 (N.D. Ala. Mar. 31, 2006).)
In another ongoing action, a Missouri federal court conditionally certified a class of Applebee’s restaurant bartenders and servers who allege that they received below-minimum-wage hourly pay for non-tip-producing work they had to perform. Potential plaintiffs—who could number about 43,000, according to plaintiff counsel Charles Gentry of Jefferson City—must opt in by December 14. (Fast v. Applebee’s Intl., Inc., 243 F.R.D. 360 (W.D. Mo. 2007).)

Even Congress is putting its oar in. After a Supreme Court decision in June upholding a DOL regulation that exempted in-home health care providers from FLSA coverage (Long Island Care at Home, Ltd. v. Coke, 127 S. Ct. 2339 (2007)), Sen. Tom Harkin (D-Iowa) introduced a bill to give those workers minimum-wage and overtime protection. At press time, the Fair Home Health Care Act of 2007 (S. 2061) had 11 cosponsors. A companion bill—H.R. 3582—has been introduced in the House of Representatives.

Not enough lawyers

The field may be hot, but it’s far from overcrowded with practitioners. Plaintiffs have a “huge underserved need” for attorneys to take on these types of cases, said Richard Seymour, an employment lawyer in Washington, D.C. As he sees it, with no public education program and “very little governmental enforcement” of the laws, workers are unknowingly “walking around with violations of their rights” by employers.

“The burden falls on the shoulders of plaintiff attorneys” to correct the injustice, Seymour said, adding that when a client contacts a lawyer to discuss any type of employment issue, the lawyer should ask about possible wage-and-hour violations.

Seymour noted that although plaintiff attorneys might otherwise try to avoid federal court, this is one area in which they want the federal court to exercise supplemental jurisdiction and ensure that state law claims are treated as required under Federal Rule of Civil Procedure 23, which governs class actions.

That’s because state law claims are subject to opt-out requirements under Rule 23, and most potential class members choose to stay in the lawsuit; in contrast, potential plaintiffs in collective claims governed by FLSA are required to opt in.

Attorneys have found that the opt-in rate is usually low—less than 30 percent of the affected pool of workers. The opt-in rate tends to decrease the farther down the employment scale the worker is, Seymour said, because lower-ranking workers are more likely to fear job loss and other forms of retaliation.

He noted that getting a federal court to exercise supplemental jurisdiction over state law wage-and-hour claims has been difficult in the past. But the 2005 Class Action Fairness Act (CAFA) has made it easier, he said—although assisting plaintiff lawyers in wage-and-hour suits was hardly the intent of the “big-business juggernaut” that drove the law through.

Pre-CAFA, federal courts that docketed FLSA claims sometimes used their discretionary authority under 28 U.S.C. §1367 to refuse to exercise supplemental jurisdiction over state law claims in the case if they raised novel or complex issues or were the predominant claims. But CAFA provides an alternative basis for federal jurisdiction, Seymour said, so if the statute’s requirements are met, a federal court will have jurisdiction over the state law claims without the discretionary grounds for declining jurisdiction. Five million dollars at stake and diversity between any defendant and any class member are the keys to the federal courthouse under CAFA.

Seymour said attorneys who are not familiar with this area can associate with those who are more experienced—in fact, working together in lawyer groups is virtually a requirement when taking on big defendants like Wal-Mart, which has faced a large number of wage-and-hour claims. (See Karen Ertel, Wage Woes Plague Wal-Mart, TRIAL 82 (Apr. 2006), www.justice.org/publications/trial/0604/news6.aspx.)

“It’s an enormous amount of work” to bring the big cases, Seymour said.

Beyond blue collars

One surprise that has emerged from the claims surge is that the struggle to be paid in compliance with the law isn’t just a blue-collar issue. Lawyers are representing employees in a wide range of job categories:

Seymour settled a case on behalf of a group of funeral directors who claimed they were owed overtime and premium payments from affiliates of Service Corp. International, a funeral and cemetery services company. (Sines v. Serv. Corp. Intl., No. 03-CV-5465 PKC (S.D.N.Y. Feb. 15, 2006).)
Brokers employed by Citigroup, Inc.’s Smith Barney unit sued for unpaid overtime due to their misclassification as exempt employees. The case was settled shortly after a California federal court certified an opt-out class action under FLSA. (Bahramipour v. Citigroup Global Mkts., Inc., No. 04-4440 (N.D. Cal. May 24, 2006).)
Computer professionals (technical staff and scientists, not help-desk employees) obtained a settlement in overtime claims against Computer Sciences Corp. (Giannetto v. Computer Sci. Corp., No. 2:03-cv-08201 GPS-E (C.D. Cal. July 15, 2005).)
At press time, a California federal court had just granted class certification in overtime pay claims by Wells Fargo Home Mortgage consultants. Judge Marilyn Hall Patel certified an opt-out class of plaintiffs who sued under California state law, as well as a nationwide class of plaintiffs with an opt-in requirement for the FLSA claims and an opt-out option for the state law claims. (In re Wells Fargo Home Mortg. Overtime Pay Litig., No. 06-cv-01770 (N.D. Cal. Oct. 17, 2007).)

George Hanson of Kansas City, Missouri, one of the attorneys for the nationwide class, praised the “remarkable scope” of the ruling and called it a big win in “a critical procedural battle.” Notices are expected to go out to the nationwide class by the end of the year, and Hanson anticipates that more than 25,000 plaintiffs will join.

Why now?

What explains the timing of the claims surge? Philadelphia lawyer Michael Donovan, who represents the Wal-Mart class plaintiffs, offered a theory.

Wage-and-hour cases are hot now “primarily because of pressure imposed on—in particular—the service industry in the face of a lot of outsourcing to foreign markets and attempts by companies to cut employee costs,” he said.

Bernstein’s order increasing damages for the Wal-Mart plaintiffs noted the jury’s finding that the company saved over $48 million by prohibiting the plaintiffs from taking rest breaks promised in an employee handbook. Is the trend likely to continue? Donovan thinks so—as long as corporations continue to abuse their workers.

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News & trends December 2007 | Volume 43, Issue 12

Lawyers in demand for wage-and-hour lawsuits

Susan J. Pannell, Associate Editor

Not enough lawyers

Beyond blue collars

Why now?

News & trends
December 2007 | Volume 43, Issue 12