Three Steps for Immunizing Your Company From Overtime Suits

By Alan Rupe

May. 16, 2006

If  lawyers who represent employees against employers—plaintiffs’ attorneys—were rats in a maze, they would get to the cheese faster than a politician gets to a handshake.

    Plaintiffs’ lawyers are maze-wise. They know how the system works. They know that if they can create factual issues of “he said, she said,” throw in some “David and Goliath” pathos and skip past the trapdoors leading to legal issues, they will most likely get their client in front of a jury. And that leads to dollars in their pockets, either through settlement (because many employers would rather settle than go through a lengthy, painful trial) or through a substantial dollar award by a jury.

    Given the U.S. Department of Labor’s newest regulations and the fact that the number of collective actions filed under the Fair Labor Standards Act now exceed all other types of employment collective actions combined, the rats are after one big hunk of cheese.

    Remember that juries decide questions of fact. And an employee’s FLSA claim is chock-full of these questions.

    Think of the employee who testifies that in spite of the company’s handbook rules regarding overtime and the prominent time clock posted on the break room wall, employees routinely worked “off the clock” because there was so much work to do. Or the employer who delegated a supervisor to ensure employee compliance with overtime rules, but looked the other way when payroll budgets were too high and production levels were low.

    There is no easy fix to eliminate a hungry lawyer on the prowl for a good plaintiff case, but some simple steps taken early on, and consistently followed, can help barricade entry to the employer’s checkbook.

    First, employers must keep in mind that there are only a handful of exceptions to the rule that employees should receive hourly pay, with time and a half for overtime.

    My first rule? Have three sets of eyes scrutinize any exception to hourly pay. The company’s corporate management, human resources administrator and legal department or outside counsel should sign off on every situation that falls outside the hourly pay standard.

    Second, audit your company’s pay practices, frequently. Regularly re-examine each job position: Review the position’s job description, the employee performance and evaluation form, and the pay scale for that position, all with the objective of a fair, impartial evaluation as to whether the position is truly exempt or nonexempt. Use someone with a fresh eye to conduct the audit, not the person who originally designated the position as exempt.

    Third, employers should develop a culture of fairness and good faith in dealing with employees. Avoid the trap of demanding mammoth output goals be accomplished within a 40-hour workweek, encouraging employees to work longer hours without overtime pay to meet quota.

    Coach and counsel, discipline and document all occasions when employees are discovered working off the clock. And save a copy of each of those disciplinary actions in a “plaintiffs’ attorneys will never take advantage of me” file. When an allegation comes along that the company has allowed a policy of encouraging employees to work off the clock to flourish, just reach for that file. You’ve made your defense lawyer’s job infinitely easier, and less costly.

    An employer’s good faith can also be established through well-drafted, even-handed and consistently enforced company policies. Employers can also ask the U.S. Department of Labor for a written ruling, approval or interpretation of a particular position’s pay status. An employer’s good faith application of a particular action because of such a ruling is an absolute defense to a minimum wage and/or overtime claim.

    By following just a few pre-emptive and proactive procedures to monitor its pay practices, a company can stop even the hungriest maze-wise plaintiffs’ lawyers in their tracks.

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