Posted on 04/11/2004 7:45:54 AM PDT by harpu
RadioShack Corp. remains at odds with thousands of current and former store managers in a class-action suit brought under the 1938 Fair Labor Standards Act over unpaid overtime.
The case has already taken 18 months, cost untold dollars and distracted corporate executives including chief executive Leonard Roberts, who gave a deposition in February.
But it may be one of the last suits of its kind as the U.S. Department of Labor prepares to release dramatic revisions to the nation's overtime laws. The Office of Management and Budget is expected to sign off on the new regulations this month.
Lawyer Jim Zouras, who represents 3,300 managers in the suit against the Fort Worth-based electronics chain, said the rule changes as proposed last summer would make it "very tough for our case to exist" if it weren't already in the works.
The new regulations will attempt to clarify for employers who they can or can't classify as exempt from overtime pay, which the Labor Department calls a long overdue overhaul of a set of laws designed half a century ago to govern a manufacturing-based economy.
The laws have been so difficult to apply to modern times that workers have increasingly turned to the legal system for interpretation. The number of lawsuits brought under the act – most related to the overtime issue – is up more than 35 percent in recent years.
The stakes are high for employers, particularly in heavily affected industries such as retail, fast food and health care.
Most are quietly awaiting the changes, hopeful that they will stop the flood of lawsuits.
"The class-action lawsuits are a huge problem for our members," said Scott Vinson, senior director of government relations for the Washington-based National Council of Chain Restaurants, the trade group for many of the nation's largest fast-food restaurants. "They're tremendously expensive. The primary reason we're supportive of the proposed rules is that at least it will inject a little clarity and, hopefully, reduce some of the lawsuits."
But the new rules have been a source of intense election-year debate.
Some lawmakers, labor groups and others say employers will use them to avoid paying overtime and want to derail them before they take effect.
More than 10 million of the nation's 69.7 million hourly workers logged more than 40 hours in a typical week in 2002, according to the Employment Policy Foundation, a nonprofit research and educational foundation based in Washington, D.C.
The Labor Department estimated that although 644,000 workers could lose overtime protection, 1.3 million would gain it under regulations released for public comment last summer.
"The proposed rules would also make the rules clearer so that employees will know their rights, employers will know their obligations, and workers can get their overtime without resorting to costly litigation," Assistant Secretary of Labor Victoria Lipnic said in a written statement to The Dallas Morning News.
The Economic Policy Institute, a liberal think tank, said that its own examination of the proposed regulations revealed that 8 million workers could be converted from hourly to salary pay and lose their overtime wages.
"It's potentially a huge, damaging change for American workers," said institute vice president Ross Eisenbrey.
Mr. Zouras, the lawyer behind the class-action suit, contends that employers such as RadioShack will use the exempt classification to take advantage of workers. A spokesman for the electronics retailer declined to comment on the case or the pending rule changes because it could affect the case.
"After the new rules, RadioShack can call them managers, pay them at least $22,100 a year, work them 70 hours a week and never be required by law to pay them overtime," Mr. Zouras said.
Mr. Eisenbrey said that scenario is likely to play out at scores of companies if the final regulations resemble the ones proposed last year.
"The only way we have a 40-hour workweek in America is because of this law," he said. "There's nothing that says employees can't work a 60-hour week, which was common before the Fair Labor Standards Act in 1938."
Stan Weiner, head of the labor and employment practice in the Dallas office of law firm Jones Day, dismissed that argument.
"I think that's a complete red herring, because I really don't think that most practical employers – and I think most employers are practical – are going to cut people's pay," he said. "I believe that even people who become exempt will receive the same net salary."
Sen. Tom Harkin, D-Iowa, attached an amendment to an appropriations bill last fall that would have blocked the new regulations, but the amendment was removed after the Bush administration threatened a veto. More recently, he has pushed to add the amendment to a bill intended to stimulate job growth.
"The right to be paid time-and-a-half for overtime work hits right at the gut of the American workforce," he said in a news release late last month, citing the 8 million figure.
If legislative efforts fail, Congress can still stop the implementation by initiating a review of the regulations or overturning them with a majority vote in both houses, officials say.
It's not yet known whether revisions made after the initial comment period last year will silence the debate, but most experts don't expect drastic changes. Labor Department officials said they can't discuss the final version until it clears OMB review. OMB received the regulations March 26 and is allowed 90 days to complete its work.
Retailers started lobbying for the rule changes in 2002 and 2003 after paying settlements in several lawsuits by store managers who disputed overtime wages. The industry spends $285 million a year in legal fees alone to defend such cases, according to the National Retail Federation.
Lawsuits have been settled or won in recent years against Wal-Mart Stores Inc., Bombay Co., Victoria's Secret, Pep Boys and Starbucks Corp., among others.
Industry groups such as the retail federation and individual employers generally favor the overtime changes, though most local companies declined to comment about specifics, saying they're waiting to evaluate the revisions.
"The industry would rather pay people more overtime as long as there's clarity in the regulations," said J. Craig Shearman, vice president at the Washington, D.C.-based retail federation, the industry's largest trade group.
"We were largely supportive of the proposal, with some reservations," said Mr. Vinson of the National Council of Chain Restaurants.
Mr. Vinson said the proposed increase in the salary threshold to $22,100 annually probably isn't a problem for the majority of its members, but it could be difficult for some restaurants in nonmetropolitan areas of the country. They may no longer be able to exempt some managers and assistants, he said, "so their costs could go up considerably. They may have to let some people go."
Dairy Queen, based in Edina, Minn., is one chain whose outlets are often in small towns.
"For the stores that we own, we are closely monitoring this," said Angela Rud, an attorney who specializes in employment law for International Dairy Queen, a wholly owned subsidiary of Berkshire Hathaway Inc. The company has no control over franchisees' employment practices, she said.
"As soon as the final regulations are published, we'll take whatever action we deem appropriate," Ms. Rud said. "That may involve changing our job descriptions; it may involve changing the compensation for our employees."
The company has 65 corporate-owned stores, primarily in Kentucky and Indiana. The majority of outlets – about 6,000 worldwide – are franchised units. That includes 586 stores in Texas, the most in any state.
For hospitals and other providers, the new rules could affect how nurses and other health care professionals are classified.
The Economic Policy Foundation estimates that 1.6 million of the nation's 2.1 million nurses are paid on an hourly basis and may earn overtime, even though they fall under the exempt classification of learned professionals. But that isn't expected to change under the new rules.
Deborah Ellison, director of compensation for Texas Health Resources, said the current regulations have "a lot of gray area," but she doesn't think the new proposals will have any impact on its employment practices. Its nurses and other clinical people are paid hourly.
"Nurses can be classified as exempt, but we chose not to do that," she said. "We have tended to make things nonexempt when we didn't have to."
For all the furor over overtime pay, Jones Day attorney Mr. Weiner said the new regulations won't necessarily be the final say on who is entitled to overtime pay.
"Just because the Department of Labor believes someone should be classified as exempt or nonexempt doesn't mean that a court would necessarily agree," he said. "The regulations lay out duties and examples, and you're not going to cover all examples."
Staff writers Maria Halkias, Karen Robinson-Jacobs and Roger Yu contributed to this report.
E-mail vgodinez@dallasnews.com
The odds are stacked against the employee since the FLSA does not permit a customary class action. Rather than the normal "op-out" class, a FLSA case for a group of employees must be an "opt-in" class which is orders of magnitude more difficut to plead and prosecute.
WalMart is the classic example of an employer stealing wages from employees, especially those who are the most necessitious of their jobs; single mothers, poorly educated, poor English language skills, and otherwise unskilled. The WalMart SEC filings and reports show a curious coincidence between the amount reported as net profit and the amounts that have been established by expert analysis and testimony to be due the Walmart workforce as the amounts unlawfully not paid for overtime and off-the-work coerced work (coerced by --"You don't really have to work off-the-clock or uncompensated overtime, but if you don't, you may not have a job tomorrow.")
Your response here is likened to a weak attempt 'to search for fly fecal matter in spilled pepper'. Nothing personal...but I personally disagree, as a good sized, small business owner.
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