Sunday, April 11, 2004
Millions in back pay was collected by the Labor Department last fiscal year.
WASHINGTON -- When Secretary of Labor Elaine Chao testified at a Senate hearing in January on the need to revamp the nation's overtime pay regulations, she said the outdated rules are costing companies nearly $2 billion a year because of what she termed "needless litigation."
Many congressional Democrats, backed by worker activists and labor unions, say the expense of litigation is an excuse the Bush administration is using to push changes in the rules that will cost millions of employees their overtime pay. They have continued efforts to block the new rules, which the department is expected to make final any day.
Regardless of the debate over motives, it is clear that overtime has become a significant legal issue in recent years.
Workers around the country are filing a record number of federal lawsuits alleging employers are breaking labor laws by asking them to work longer than 40 hours without proper pay.
Back pay collected
The Labor Department collected more than $212 million in back pay for workers last fiscal year, the most in a decade. And there have been some sizeable judgments and settlements in overtime suits in recent years.
The number of federal lawsuits held steady at about 1,500 a year in the 1990s. It rose to 3,904 in 2002, then dropped off to 2,751 last year, according to the Administrative Office of the U.S. Courts. Similar surges are occurring in many state courts, especially in California, where the law is considered more favorable for workers.
Last month, a California appeals court affirmed a $90 million verdict against Farmers Insurance Exchange that alleged the insurer had cheated 2,042 claims adjustors out of years of overtime pay by saying they were exempt managers. A company spokesman said the insurer would appeal to the California Supreme Court.
Suits against Wal-Mart
Wal-Mart Stores Inc., the nation's largest retailer, is facing more than three dozen lawsuits alleging workers were paid less than they deserve under law, including suits in California, Florida, Massachusetts, Oregon, Indiana and Minnesota.
In February, the Minnesota Supreme Court denied Wal-Mart's appeal of a lower-court ruling granting class-action status to more than 64,000 workers in that state who allege they were denied overtime pay and work breaks.
In Oregon, a federal jury found the Bentonville, Ark.-based company owed back pay to 80 current and former employees. In late 2002, another Oregon jury ruled that the company made workers at 18 stores in the state work overtime without pay. Wal-Mart officials have said that it is company policy to pay workers for every minute they work and that the lawsuits have no merit.
Many judges are granting the cases something akin to class-action status, allowing lawyers to solicit scores of present and former employees, making the cases more expensive to defend.
Dollar General Corp. is being sued in Alabama, and the judge has opened the case to any of the chain's 6,700 store managers if they were "regularly" asked to work more than 50 hours a week. The company has said it did not violate the law.
A 30-percent jump
Meanwhile, the number of workers winning back pay because of administration action by the Labor Department jumped 30 percent last fiscal year, to more than 342,000. In November, for example, the department reached an agreement with T-Mobile USA Inc. to pay 20,500 workers about $4.8 million in back wages for "off-the-clock" work for which they weren't compensated.
Attorneys who represent workers say lawsuits and enforcement actions are increasing because more employers are violating labor law more than in the past. One, Adam T. Klein, said that weak enforcement of labor laws under both the Clinton and Bush administrations has left the private bar "to pick up the slack."
Attorneys who represent employers counter that the overtime rules are no longer suitable for a modern workplace.
"The rules are so outdated they are a litigator's dream," said Larry Bridgesmith, an attorney who represents corporations. He said a court decision that allows workers to be notified they might be eligible for back pay had "increased the level of interest" among plaintiffs generally and made them eager to pursue claims.