Cheating employees out of their wages. Again, the usual suspects. WalMart, Starbucks, IBM, Merril Lynch, Morgan Stanley et alia. This is another example of why they need oversight.
Wage wars
Workers from truckers to stockbrokers are winning overtime lawsuits
By Michael Orey
Updated: 2 hours, 53 minutes ago
There's a place in Reno, Nev., that practically mints money. It's not one of the many casinos in town. Nor is it one of the legal brothels that operate in the area. It is a law firm, located in a wing of a private home nestled in the foothills of the Sierra Nevadas. From a utilitarian office, with a view of horses grazing in a neighbor's paddock across the road, attorney Mark R. Thierman pursues a practice that in recent years has won his clients hundreds of millions of dollars from some of the biggest names in Corporate Americaand produced tens of millions for himself.
A Harvard Law School grad, Thierman, 56, spent the first 20 years of his career as a management-side labor attorney and self-described union buster. He has been pelted with eggs by construction workers and his tires have been slashed by longshoremen. But in the mid-1990s he brought a series of cases on behalf of workers in California and established himself as a trailblazer in what had long been a sleepy, neglected area of the law. Thierman sues companies for violating "wage and hour" rules, typically claiming they have failed to pay overtime to workers who deserve it. Since the beginning of this decade, this litigation has exploded nationwide. Because wage and hour laws have been so widely violated, undetonated legal mines remain buried in countless companies, according to defense and plaintiffs' lawyers alike.
No one tracks precise figures, but lawyers on both sides estimate that over the last few years companies have collectively paid out more than $1 billion annually to resolve these claims, which are usually brought on behalf of large groups of employees. What's more, companies can get hit again and again with suits on behalf of different groups of workers or for alleged violations of different provisions of a complex tapestry of laws. Framed on the wall of Thierman's office, for example, is a copy of a check from a case he settled for $18 million in 2003 on behalf of Starbucks store managers in California. But the coffee chain is currently defending overtime lawsuits, filed by other attorneys, in Florida and Texas. Wal-Mart Stores is swamped with about 80 wage and hour suits, and in the past two years has seen juries award $172 million to workers in California and $78.5 million in Pennsylvania.
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"This is the biggest problem for companies out there in the employment area by far," says J. Nelson Thomas, a Rochester, N.Y., attorney, who, like Thierman, switched from defense to plaintiffs' work. "I can hit a company with a hundred sexual harassment lawsuits, and it will not inflict anywhere near the damage that [a wage and hour suit] will." Steven B. Hantler, an assistant general counsel at Chrysler, says plaintiffs' lawyers are "trying to make all employees subject to overtime. It's subverting the free enterprise system."
In overtime cases, Depression-era laws aimed at factories and textile mills are being applied in a 21st century economy, raising fundamental questions about the rules of the modern workplace. As the country has shifted from manufacturing to services, for example, which employees deserve the protections these laws offer? Generally, workers with jobs that require independent judgment have not been entitled to overtime pay. But with businesses embracing efficiency and quality-control initiatives, more and more tasks, even in offices, are becoming standardized, tightly choreographed routines. That's just one of several factors blurring the traditional blue-collar/white-collar divide. Then there's technology: In an always-on, telecommuting world, when does the workday begin and end? The ambiguity now surrounding these questions is tripping up companies and enriching lawyers like Thierman.
About 115 million employees 86 percent of the workforce are covered by federal overtime rules, according to the U.S. Labor Dept. The rules apply to salaried and hourly workers alike. 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. 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.
As Thierman sees it, these are the rank and file of a white-collar proletariat. "In the 1940s and 1950s," he writes in an e-mail, "a large portion of American workers who were protected by overtime laws seem to have been forgotten as inflation drove up the absolute (not the relative) amount of compensation, and the bulk of workers began wearing sports coats and processing information instead of wearing coveralls and processing widgets." In a subsequent interview he says: "I'm interested in the middle classthose are my folks."
The core wage and hour law, the federal Fair Labor Standards Act, has been on the books since 1938. The New Deal statute, which mandated that a broad swath of the workforce receive 90 minutes' pay for every hour worked beyond 40 in a week, had two goals. One was to reward laborers who put in long hours. But another was to expand employment by making it cheaper for companies to hire additional workers than pay existing ones time and a half. This penalty, Thierman argues, is ineffective today, given the enormous costs of health care and other benefits for each employee. The result, he says, is that businesses prefer to require long hours, and they either pay overtime or notand hope they don't get caught.
Of course, not everyone is entitled to overtime. Under "white-collar exemptions" to the law, employers don't have to pay extra to various executives and professionals. These exemptions, labor historians say, are rooted in decades-old thinking about a workforce that bears little resemblance to today's. A clear distinction between professional and production classes used to be assumed. Nowadays mortgage brokers, for instance, crank out loan applications in assembly line operations and are paid based on how much they produce. Lenders around the country have battled, largely unsuccessfully, to defeat overtime claims by these employees.
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