Surge in wage suits has courts on overtime

The explosion in wage-and-hour lawsuits is readily apparent in the cramped Dakota County courtroom where the overtime and break policies of retail giant Wal-Mart are at the center of an intense legal battle with nationwide implications.

The room is lined with enough banker's boxes of files and three-ring binders to make an Office Max proud. There's a reason for all the paperwork: Potentially millions of dollars are at stake.

A Pennsylvania judge last week added $62.3 million in punitive damages to a $78.5 million compensatory award for Wal-Mart workers in that state who were made to work "off the clock" or during their rest and lunch breaks.

The Minnesota Wal-Mart case seeks $27 million in actual damages for 56,000 employees on the basis of similar allegations of overtime violations. Punitive damages have yet to be addressed.

The Wal-Mart litigation is among the more high-profile examples of a wave of wage-and-hour litigation that has swept through corporate America over the past five years.

Most recently in Minnesota, U.S. District Judge Michael Davis in Minneapolis granted class-action status to a lawsuit by call center employees for Qwest Communications.

The suit contends that workers were required to do unpaid work before and after their scheduled shifts. Potentially 6,700 employees are covered.

Attorneys who represent employers contend that the increase in overtime cases is the result of plaintiff's attorneys looking for ways to exploit the 69-year-old U.S. Fair Labor Standards Act.

Attorneys for the workers contend they are trying to right a variety of wrongs -- sometimes done wittingly, sometimes unwittingly -- by corner-cutting companies trying to maximize profit.

Enough gray area exists about who is covered by the federal overtime law and who is exempt that lawyers on both sides will have steady work for years.

"If there's been a violation [of the Fair Labor Standards Act] by a half hour during lunch and you multiply that by 56,000 employees times five days a week, times four weeks a month, times 12 months a year, times X number of years, that can add up," said Dan Oberdorfer, an employment attorney for the Minneapolis firm of Leonard, Street and Deinard. "These are expensive to defend."

The Federal Labor Standards Act (FLSA) is a product of the Great Depression, created in 1938 to protect workers by setting a minimum wage and establishing an overtime system. The government used the time-and-a-half overtime provision as an incentive to get employers to offer more jobs to out-of-work Americans, as well as to reward workers for long shifts.

Nearly 4,400 FLSA lawsuits were filed in the United States last year, according to the Administrative Office of the United States Courts. That's up from 3,400 suits in 2005 and 1,961 in 2001. Not all FLSA lawsuits involve overtime issues, but many do.

Some workers exempt

The law exempts certain employees from coverage. Those positions are loosely defined as executive, administrative, professional, creative, some computer jobs and outside sales.

Beyond suits alleging that some companies forced workers to put in overtime without compensation, recent challenges to the exemptions have opened new ground for lawyers to fight over.

"Individuals are saying, 'I'd like to have that [overtime] protection. Let's test the water and see if we're covered,'" said David Larson, a professor in employment law at the Hamline University School of Law.

In federal court in Minneapolis, for instance, Caribou Coffee is defending its classification of store managers as exempt from the FLSA's overtime provisions. Attorneys representing up to 400 managers for the Minnesota-based chain argue that Caribou managers perform basically the same duties as front-line baristas and are entitled to overtime. The Caribou suit is similar to one against Starbucks in California.

White-collar lawsuits

New lawsuits are surfacing in white-collar environments as well. Sales representatives for large pharmaceutical companies have raised similar challenges to their employers' denial of overtime, as have stockbrokers and computer software engineers.

"These cases are driven by lawyers. Instead of one plaintiff they can represent hundreds, if not thousands, of individuals," said Joseph Sokolowski, an employment attorney at the Minneapolis firm of Fredrikson & Byron.

The financial implications of these overtime lawsuits has attorneys such as Sokolowski concerned. The cases can cover years of employment, and volumes of pay records have to be produced and analyzed by both sides.

While plaintiff's attorneys typically sue employers on job discrimination issues one worker at a time, wage-and-hour cases allow them to sue on behalf of schools of employees.

"Is the reward greater? Yes. But the risk is exponentially greater too," said William O'Brien, a plaintiff's employment attorney with the Minneapolis firm Miller-O'Brien-Cummins. He noted the greater amount of pretrial work that has to be done.

"Sure, plaintiffs attorneys are looking to make money," said Larson, the law professor. "But if they win, then they were right and there was a problem and it was time for correction."

David Phelps • 612-673-7269

David Phelps • dphelps@startribune.com