Increased FLSA Lawsuit Trend Expected to Continue

10 February 2010 Publication

The Fair Labor Standards Act is an old law creating new headaches for employers. The FLSA requires the payment of a minimum hourly wage as well as overtime pay to non-exempt employees who work in excess of 40 hours during a work week. Seeking to recover significant money by representing large groups of employees, plaintiff attorneys have targeted every industry, including construction, with FLSA lawsuits. The number of private FLSA lawsuits has increased for several years, and this trend is expected to continue.

FLSA lawsuits against home builders have focused on managers and sales personnel. The plaintiffs have alleged that they were misclassified as "exempt" and deprived of overtime compensation. The lawsuits seek to recover unpaid overtime wages, liquidated damages in an amount equal to the overtime wages, and attorney's fees. And the plaintiffs want permission from the court to notify everyone with similar claims of the opportunity to join the lawsuits.

In addition to lawsuits filed by plaintiff attorneys, employers must be concerned with government enforcement. The U.S. Department of Labor's Wage and Hour Division investigates and prosecutes FLSA violations. The Department of Labor has announced its intention to increase enforcement and recently hired 250 new field investigators.

Under the FLSA, all hours worked must be paid. The FLSA, however, does not define "work." Under some circumstances, waiting time, on-call time, rest periods, meal periods, and travel time can constitute "work." In the past several years, many employers have been hit with multi-million dollar verdicts for allowing employees to work off the clock.

The FLSA exempts certain categories of employees from its minimum wage and overtime requirements. The "white-collar" exemptions include employees employed in an executive, administrative, professional or outside sales capacity. The employer has the burden to prove that an exemption applies, and job titles and form of payment are not determinative. Therefore, paying a salary or paying on a commission basis does not mean that overtime is not owed. For an exemption to apply, an employee's specific job duties and compensation must meet the requirements of the Department of Labor's regulation.

To avoid potential liability, employers must assess their current pay practices. Employers should identify employees who are paid a salary or paid by commission and determine whether they satisfy all the requirements for an exemption. And employers should evaluate whether employees paid by the hour are receiving pay for all of their work. Finally, the overtime rate must include all compensation except discretionary bonuses, so employers should analyze the overtime rate to confirm that it includes all commissions and bonuses.

Please contact any member of our Construction or Labor and Employment Practice Groups if you have particular questions about your policies and procedures in this regard. We value your time and appreciate your input.

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