Wage & Hour - Development & Highlights : New Jersey Labor and Employment Lawyer & Attorney : Fox Rothschild LLP Law Firm : Serving Essex County, Sussex County, Roseland, New Jersey

A group of Gold’s Gym employees have filed a FLSA collective action.  Their theory, similar to a rising number of such suits, is that they were required to work off the clock.  The employees claim they have to work between 50-60 hours per week, but are only paid for forty.  The case is entitled Lane et. al. v. Gold’s Gym International Inc., and was filed in federal court in Texas.

In a somewhat ironic twist, the Complaint notes that the Company has a policy prohibiting employees from working more than 40 hours a week without prior approval and so, to comply with this policy, Gold’s general managers allegedly (and routinely) required workers to first clock out and then continue to work off the clock or, allegedly, to falsify their time records to show that they worked fewer hours than they actually did..

The lead plaintiff (still a current employee) alleges that he (and other supposedly similarly situated employees) were compelled to make monthly sales targets and to also train fitness consultants. Those duties required that they often had to work in excess of forty hours, but the Company typically refused to acknowledge any overtime claims.  The plaintiffs claim that this was a company-wide policy, which, under principles of FLSA collective actions, gives the class the commonality and similarity needed for conditional (and ultimate) certification.

On this point, the Complaint asserts that “although the named plaintiffs were employed by Gold’s at two of its San Antonio locations, sales managers at its facilities across San Antonio and the United States are believed to have all worked similar hours and were compensated under Gold’s common policy/scheme of not paying sales managers one and one-half of their regular rate for all hours worked over 40 in a workweek.”

There has been a veritable explosion of these off-the-clock collective/class cases, in many different industries.  We will see where this goes.  The institutional problem in the retail industry, any retail industry, is that oftentimes labor budgets are set tightly and managers (at all levels) are judged by whether they stay within these budgets.  It is this pressure that may drive the “need” for off-the-clock work.  There are procedures that management can implement, to both stay within budget, as well as the law, but a keen self-scrutiny of compensation practices and corporate goals is necessary.
 

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On July 14, 2011, several lobbyists and business representatives argued before the House Education and the Workforce Subcommittee on Workforce Protections (“Subcommittee”) that the Fair Labor Standards Act (“FLSA”) needs to be revised.  J. Randall MacDonald, senior vice president of human resources at IBM and chairman of the HR Policy Association, told the Subcommittee that the FLSA is “failing America” because it does not provide employers with enough flexibility in work arrangements with employees, nor does the law provide employers with sufficient certainty regarding their legal obligations.

While the hearing was not called to discuss amending the FLSA, MacDonald and other management side lobbyists blamed the climbing unemployment rate on the influx of wage and hour lawsuits over the past decade.  Similarly, MacDonald argued that employers cannot comply with the law because the standards set forth in the FLSA are not applicable to the modern workplace.  This sentiment was echoed by the chair of the Subcommittee, Tim Walberg, who stated, “It is hard to imagine a law intended for the workforce known to Henry Ford can serve the needs of a workplace shaped by the innovations of Bill Gates.”

Among the proposed changes to the FLSA are: clarification of which computer employees are exempt from overtime; guidance on whether activities such as checking email are considered work; and the designation of well compensated, commissioned “inside” sales employees as exempt.

Judith M. Conti, federal advocacy coordinator for the National Employment Law Project in Washington, D.C., as well as various Democrats on the Committee, opposed these changes to the FLSA.  Ms. Conti stated that revisions to the FLSA could detract from the protections afforded employees.  Rep. Dennis J. Kucinich argued that the business representatives appearing before the Subcommittee were “advocating for a system that is manifestly unfair” and that allowed wages to go down while corporate profits rose.

The proposed changes to the FLSA could provide employers with much needed assistance in complying with the law and avoiding potential lawsuits.  However, employers shouldn’t hold their breath as there is no reason to believe that Congress will be revising the FLSA anytime soon.
 

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David LaGasse recently wrote a column in Employment Law 360 that  highlighted some of the wage-hour issues and  problems facing start-up companies.  I agree with these assessments and can comment further as follows.

He mentioned the tendency to classify workers as independent contractors.  On one level, this is tempting and seemingly much easier for a new employer.  No taxes.  No deductions.  No inclusions in benefit plans.  But---the IRS and many state and federal agencies are cracking down on what they perceive as a wholesale misclassification of statutory employees as independent contractors.  Such people must have an independently established business, doing work for other clients and customers.

The tendency to misclassify workers as exempt or non-exempt also is a minefield for new companies.  Just paying someone a salary does not automatically make someone exempt from receiving overtime.  In addition to receiving the requisite salary (and it differs from the federal minimum to the minimum salary levels of various states), the employee must perform certain types of duties.  The key here is an analysis of the job duties of different positions, matched up against the regulatory criteria.

 Another problem, or potential problem, is to know what activity actually constitutes compensable "work time."  Many employees engage in a number of preliminary and postliminary activities that may be so connected to their regular jobs that this extra time is converted or transformed into working time.   One sign of the times--I have noticed an uptake in so-called "off-the-clock" lawsuits involving employees who claim their off-duty use of PDAs, blackberries and checking e-mail constitutes "work time."  

The key is to have a basic understanding of wage-hour laws in the particular State(s) the new entity does business in and then have a study done of compensation policies and practices, with recommendations being made by the drafter for the best way to both comply with these laws and yet be employer-friendly. 

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