New Jersey Employment Law Blog

We've posted before on a burgeoning issue of employment law --- so-called independent contractor litigation.  In essence, the cases claim that in some circumstances workers are treated by their employers as independent contractors are in fact employees of the company.  The issue is not just a matter of definition, but has important consequences in the real world of business.  Employees are entitled, for instance, to the overtime protections of the Fair Labor Standards Act and similar state laws.  Independent contractors are not. 

There is an obvious business reason for employers to want to classify as workers as contractors: it's cheaper and allows them to control their costs.   But it's not a low-risk strategy, as employers invite the scrutiny not only of the affected workers, but also of the IRS.

Here's a story from Lawyers USA involving such a claim against Federal Express.  We won't take your time with the facts.  They're well-explained in the story.  The important thing is that this kind of story is increasingly common, reminding employers --- all employers, large and small --- that they need to make their classification decisions carefully.  Failure to do so invites trouble. 

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Radio Shack is the latest big company to get caught in the web of federal and state overtime regulations.  The Dallas Morning News reports that Radio Shack has just concluded a settlement with a class of plaintiffs consisting of about 4,000 Radio Shack store managers. 

The settlement calls for payment of $8.8 million to the "managers."   The court found that they were entitled to overtime pay because, despite their managerial titles, they were not exempt from the overtime requirement of the FLSA.  The court had "ruled that store managers who did not supervise at least 80 hours of subordinate time at least 80 percent of their workweeks did not meet the legal standard for exemption and were therefore entitled to overtime pay.

The Fair Labor Standards Act, along with many state law analogs, requires that most employees be paid time and one half every time they work more than 40 hours in a week.  There are exemptions for certain classes of employees, such as executive, administrative, and professional employees.  As demonstrated once again by the Radio Shack case, the correct classification of employees is a problem that continues to plague business.  The United States Department of Labor has useful information on its web site, including this fact sheet. 

The proper classification of employees for FLSA purposes is deceptively complex.  The fact that sophisticated employers continue to have trouble in this area teaches us that all employers, large and small, should periodically review their wage and hour practices to ensure that they comply with applicable federal and state laws.

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Here's an article from Business Week, via MSNBC, that neatly explains how huge amounts of money are changing hands in wage and hour litigation brought under the Fair Labor Standards Act and coordinate state laws.   Whether you are with a business that wants to avoid wage problems, or are an employee with a wage problem, this article is well worth the five minutes of your time that it will take to read.

A tip of the hat to Candice Boyd of the California Labor & Employment Law Blog, who brought this worthwhile article to our attention. 

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According to a recent report, up to 80% of all employers fail to comply with federal and state wage and hour law requirements.  That's a startling number but one worth noting.  There's substantial legal risk to employers, including the risk of class actions, from these violations, which often are easy to prove.  Employers of all sizes should check with their attorneys to be sure that they comply.

Thanks to Carrie Kurzon of The Ottinger Firm for posting information on this problem. 

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The US Supreme Court's controversial decision in the Ledbetter case, which we have previously  posted on several times, is still stirring controversy among the political class.   The Washington Post cites recent Ledbetter developments as proof that the Court is turning too far to the right.  Whether true or not, the highly technical Ledbetter decision is making lots of waves and giving Lily Ledbetter her 15 minutes of fame.

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An editorial in this morning's Newark Star-Ledger applauds "a little-noticed decision last week by the state Supreme Court that allows 72,000 current and former New Jersey employees to bring a class-action lawsuit against Wal-Mart."  The decision in Iliadis v. Wal-Mart may not have attracted much notice from the public at large, but it is just a few days old and already is attracting lots of notice from employment lawyers.  See preliminary reactions from Law.com, Bloomberg News (via Wal*Mart Watch), and New Jersey Lawyer.

We posted on this case on January 10, 2007, when the Appellate Division of NJ Superior Court affirmed a trial court's denial of class action status to a claim that could involve as many as 72,000 Wal-Mart employees.  We noted that "a lot of dollars are riding on the outcome" of the pending appeal to the Supreme Court.

The plaintiffs allege that Wal-Mart violated statutes, regulations, and its own policies about how employees should be paid.

The Court's 5-1 opinion by Chief Justice Zazzali ordered (over the dissent of Justice Rivera-Soto) that the plaintiff class be certified, so the case will go forward as a class action.  We will keep you informed as it does.

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If the allegations of a recently filed class action complaint are true, defense contractor Michael Bianco, Inc. of New Bedford, MA, got too cute in its effort to avoid paying overtime wages to its workers.

The Boston Herald reports that about 500 workers, many of them illegal immigrants, are members of the class.

The lawsuit alleges that Bianco created a second firm, Front Line Defense, also listed as being in New Bedford, and used that firm to pay employees who worked a second late shift each day. Michael Bianco checks were issued for the work done in the morning, said the suit.

Front Line Defense allegedly was a shell corporation. Thus, say the plaintiffs, they were paid base rate for all hours worked even though they were entitled to time and a half for hours in excess of 40per week.  You have to give Bianco some credit for creativity, but if it loses it will wish that it had arranged its pay practices in a more conventional way.

We note that Bianco denies the allegations and will keep you advised of developments.

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The news today brings word of two cases that address an employer's obligation to pay wages and overtime in accordance with the law, but in much different contexts. 

First, a federal judge in Idaho recently approved a settlement between a class of plaintiffs and Albertson's LLC, which owns the Supervalu chain of supermarkets.  An early report comes from the AP.  The amount of the $53 million settlement is eye-popping.  About 7,000 employees will receive an average of $7,000 each in unpaid overtime.  Tack on an additional $6.5 million in attorneys fees and you have a total settlement package of about $60 million.   

The second story comes from Kansas, where an undocumented worker sued to recover wages that he was promised by his employer, Burrito Express.  A related story is here and the opinion of the Kansas Supreme Court is here.  The short story is this:  give an undocumented worker a job and you owe him full compliance with applicable wage and hour laws.  You cannot hide behind his immigration status to deny him the benefit of a statute.

This same issue was raised before New Jersey federal district judge Joseph Greenaway in 2005.  He came to exactly the same conclusion; in fact, his written opinion was cited by the Kansas court.  As Judge Greenaway synthesized the concept:

 the persuasive force of the broad language of the [Fair Labor Standards Act], the decisions of other federal courts, and the Labor Department's interpretation of the Act, leads this Court to conclude that Plaintiffs should not be precluded, as a matter of law, from obtaining relief under the FLSA for work already performed, merely by virtue of their undocumented status.

Note that the ruling applies not only to the obligation to pay base wages, but also to statutory penalties that can be imposed against employers for intentional violations of the statute.

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You seemingly can't look at the business news any more without finding a story about Wal-Mart's overtime wage payment problems.  Here's another one.  This time they turned themselves in, to the tune of about $33 million owed to about 87,000 employees.

Even so, it sounds like they may have dodged a larger potential liability.  No fines or penalties were assessed by the U.S. Department of Labor.  

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Wal-Mart just got potentially bad news from the New Jersey Supreme Court.  The nation's largest employer is the target of lawsuits around the country that claim that Wal-Mart engaged in a variety of unlawful employment practices, including intentionally depriving its associates (that's "employees" to the rest of us) of required rest breaks.  The purpose, say the employees, was to cut costs and boost profits.

The Appellate Division of NJ Superior Court denied the plaintiffs' attempt to have the case certified as a class action.  That was good news for Wal-Mart.  However, the NJ Supreme Court just granted the plaintiffs' motion for leave to appeal, which is the bad news.  So now the Supremes will decide whether the case will proceed as a class action.   A lot of dollars are riding on the outcome.

You will find the Appellate Division and Supreme Court opinions here.

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Here's another reminder of how careful businesses must be when determining which of their employees must be paid overtime.  This time it's pharmaceutical sales representatives who are claiming entitlement to overtime, as reported here.  As the article makes clear,

New Jersey, of course, is "pharma central," so this is an issue that could affect many businesses and business people in the Garden State.

We will keep you advised.

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We recently came across a good article listing the "top 5" mistakes that employers make under the recently revised Fair Labor Standards Act. Given the complexity of the statute, these may or may not actually be the top 5, but they are indisputably problem areas.

1. Believing salaried employees are automatically exempt from overtime.
2. Misclassifying assistant managers.
3. Automatic deductions for meal breaks.
4. Not paying for overtime that has not been approved in advance.
5. Allowing employees to "waive" their right to overtime.

To this list we would add a 6th. New Jersey, like some other states, has its own version of the FLSA. It imposes some additional obligations upon employers. Both the federal and state laws must be complied with!

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Yesterday was the first official day of Summer. Today my daughter graduates from high school. No doubt about it --- it is vacation time.

Which brings to mind a common question in severance negotiations.

What obligation does an employer have to pay a terminating employee for accrued but unused vacation time? (What constitutes "accrued" vacation time is a question for another day.)

In New Jersey, under Botany Mills v. Textile Workers, an old and infrequently cited court decision, the answer is "all of it," unless the employer has adopted and made available to its employees a policy that says otherwise. There are sound reasons why particular employers may want to adopt such a policy, and equally sound reasons why they might allow terminating employees a full payout of vacation time. The important thing is that the policy accurately define the rights that you want your employees to have. Conversely, terminating employees should be familiar with the policy so that they receive all compensation to which they are entitled.

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Three former mortgage brokers for Washngton Mutual, the country's third largest mortgage lender, have filed a class action lawsuit claiming that they were unlawfully denied overtime pay. Here's the link to an early report. This development follows the recent settlement of similar charges against stock brokerage companies.

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