Overtime lawsuits are the hottest employment lawsuit trend.  Nevada lawyer Mark R. Thierman is a demigod in this corner of the legal world.  Thierman has won hundreds of millions of dollars from companies in unpaid wages.   Beginning in the mid-1990’s, Thierman filed the first in a series of lawsuits against California employer after having spent most of his career as a management-side employment attorney. 

The federal Fair Labor Standards Act (FLSA) requires the payment of overtime and minimum wage for most workers. About 115 million employees—86% of the workforce—are covered by federal overtime rules, according to the U.S. Department of Labor (DOL). Plenty of wage and hour lawsuits are filed on behalf of the traditional working class, be they truckers, construction laborers, poultry processors, or restaurant workers. In fact, some would say that wage and hour suits have generated a cottage industry for plaintiffs’ lawyers.  But no one has been more successful than Thierman in collecting overtime for employees who are far from the factory floor or fast-food kitchen.

His biggest settlements over the last two years have been on behalf of stockbrokers, many of whom earn well into the six figures. Thierman has teamed up with other lawyers to extract settlements totaling about a half-billion dollars from brokerage firms, including $98 million from Citigroup’s Smith Barney and $87 million from UBS Financial Services Inc. (As is typical in settlements, the companies do not admit liability.) With those cases drawing to a close, he and other attorneys already are pursuing new claims on behalf of computer workers, pharmaceutical sales reps, and accounting firm staff.

BusinessWeek.com has a great article titled, "Wage Wars," detailing Thierman’s Robin-Hood style ventures and the wave of overtime litigation sweeping major corporations across the country.  Since 2000, overtime litigation has exploded nationwide. The U.S. Chamber of Commerce decried the "FLSA litigation explosion" and its having become the "claim du jour" for plaintiffs’ attorneys.

Thierman shrugs at such concerns. The alternative, in his view, would be to have the laws enforced by a government bureaucracy.  Thierman professes to be helping the little guy: "I’m interested in the middle class—those are my folks."

[H/T to George’s Employment Blawg and the Ohio Employment Law Blog]

Oh, Starbucks! Why is it that everyone always seems to be picking on you?!

This time, it seems that some baristas don’t like to share.

On Thursday, March 20, a California Superior Court judge in San Diego awarded a class of 100,000 baristas an astounding $105 million in unpaid tips. Now that’s a LOT of quarters tossed in the metal milk frother, eh?

The suit was initiated by Jou Chau, a college student who worked at a San Diego Starbucks location in 2003-2004. He filed the suit that was later converted into a class action.

The claim alleges that supervisors wrongfully shared in the employees’ tips. California law permits tip pooling–where everyone tosses their tips in the pool and then the tips are divided evenly among all who contributed. But pooling wasn’t the problem. California law prohibits restaurant owners or their “agents” from sharing in the pool. “Agents” has generally been interpreted as managers and supervisors.

Like the counter employees, (”baristas” as they’re known to most), shift supervisors at Starbucks make coffee and serve customers. They do the same work as the beloved baristas but they are also responsible for setting work schedules and managing employees.

Fair or Unfair?

So why can’t they share in the reward? To some, this line might seem a bit attenuated. The purpose of the division between supervisor and employee is a reasonable one. Owners and managers who don’t have to slave away with the employees who deal directly with the public shouldn’t be able to swoop in at the end of the shift just to take their “share” of the booty. In that context, the law seems perfectly fair.

But in the Starbucks scenario, the fairness seems to fade some. If the dividing line between “supervisor” and “employee” is little more than who makes the weekly schedules and who has the pleasure of taking customer complaints, it doesn’t seem strikingly unfair that they should share in the tip pool. Afterall, their expert frothing skills likely helped earn some of the tips.

Wider Implications

Starbucks, the Seattle-based coffee chain, said it would appeal the decision, which it described as “fundamentally unfair and beyond all common sense and reason.” But if the appeal is unsuccessful, the implications of the decision could have real impact on the day-to-day operations of stores. Starbucks would likely have to stop using supervisors for double-duty–they could either do supervisory duties or employee duties, but not both.

Given the size of the stores, does it really seem practical to have a supervisor assigned to every shift who hangs out in the office while the baristas sweat it out at the espresso machine? Probably not. But why would supervisors do the work required of the baristas and not be eligible for the same rewards? And don’t forget the cost! An added employee would be needed to cover the work that the supervisor can no longer perform.

But the real question on the minds of coffee lovers across the nation is, “Will this mean a price hike for our morning cup?” Now that is a serious implication, for sure!!

The N.Y. Times reported this story on Friday, March 21. And the Starbucks Union (IWW Starbucks Workers Union) has a different viewpoint, which you can read about here.

[Hat tip to the Class Action Defense Blog]

Wage and Hour laws, such as the Fair Labor Standards Act (FLSA), present some of the most challenging hurdles for employers. The FLSA and its state and federal counterparts carry extraordinary penalties and, if an employee successfully brings suit to collect unpaid wages, employers are left holding the tab for the wage amount, multiplied twice, and the plaintiff’s attorney’s fees. This makes a claim for unpaid overtime a huge risk for employers and an even bigger attraction for plaintiffs’ lawyers.

So why don’t employers “just” abide by the laws and avoid these risks? Well, I suppose for a lot of reasons. One that we hear quite often is that, “everyone” in their industry pays this way!! And they’re likely telling the truth. Often industries develop certain wage payment practices especially suited for the unique way in which their employees work. Some companies, for example, are highly seasonal and tend to employ a great deal of teens during summer months. To avoid the paperwork nightmare for employee benefits, they pay the young people on a “per diem” rate.

Or, what about the salon industry? Stylists’ earnings are based partially on service-based commissions, partially on product-based commissions, as well as a flat hourly rate. But then, just to make it more complicated, many salons historically have required stylists to reimburse the business for the products that they use. Sort of like the typical office worker reimbursing their employers for each pencil they use to perform their jobs. As you can probably imagine, these unique pay arrangements can create major wage payment nightmares if the Department of Labor becomes involved.

And still, when an employer calls us to seek counsel on an employment matter and learns of the great perils of their payroll system, they just do not want to believe us. It is not uncommon for them to resist a payroll restructuring. In part because change can be difficult, time- and resource-consuming, and, well, just because the idea of change puts most of us on high alert, even if just temporarily.

But another, very common, reason for the push-back we get from otherwise loyal and trusting clients? “Because everybody pays like this!!” It can be difficult to change your payroll habits, certainly. But think of yourself as a trendsetter. Or, better yet, think of yourself laughing all the way to the bank as competitors get stuck with serious fines, penalties, and civil suits. Then call your employment counsel and have them conduct an audit of your compensation structure.

EXTRA: For those of you just dying to know more about overtime calculations, take a look at the Department of Labor’s handy Overtime Calculator. You answer a series of uncomplicated but unexpectedly detailed questions and, voila! The Calculator pops out the amount of overtime owed, if any, to the employee. It is a great tool (and free), thanks to Uncle Sam, so take advantage of it next time you’re pondering the world of wage payment.