Wal-Mart ordered to pay $140.5 million on overtime claim

Last week, I commented on the risks companies face from a lack of control over wage and hour practices (here, and here). This week, a federal judge in Pennsylvania reinforced my point for me by ordering Wal-Mart to pay an additional $62 million in statutory liquidated damages to 124,506 current and former Pennsylvania employees who last year a Philadelphia jury found were not properly compensated for off-the-clock work and missed rest breaks. That jury had previously awarded $78.5 million in compensatory damages to 186,000 current and former Wal-Mart employees. That jury verdict was based on the finding that Wal-Mart failed to pay its employees for time they worked off the clock or for their missed rest breaks. Motions are still pending on whether the plaintiffs are entitled to interest on their award, and whether they are entitled to recover attorneys' fees, which are estimated at a staggering $48 million.

This verdict is a good time to remind everyone that it is a good idea to have a policy in your handbook that requires all overtime to be authorized and forbids any hourly employee from working through a break without prior approval. It is unclear whether Wal-Mart had such a formal policy, if it was merely its practice to do so. Whatever Wal-Mart was doing, however, it was negatively affecting hundreds of thousands of its employees. Regardless, if it is your expectation that your employees take their breaks, you should spell out that expectation in the employee handbook. That way, if an employee is serially violating the policy by working through lunch without permission, you have a defense to refusing to pay that employee if you so choose.

Jury rules against Isiah Thomas

The jury in the Isiah Thomas sexual harassment trial has returned a verdict of $11.6 million dollars against Madison Square Garden and its chairman, James Dolan. The jury spared Isiah Thomas any personal liability, although it is certainly hard to calculate the damage this trial has done to his reputation. The verdict breaks down as follows: MSG owes $6 million for condoning a hostile work environment and $2.6 million for retaliation. Dolan owes $3 million. ESPN.com quotes U.S. District Judge Gerard E. Lynch calling the verdict "eminently reasonable." It is therefore doubtful he will do anything to reverse the verdict or lessen the amount. MSG, meanwhile, is quoted as saying: "We believe that the jury's decision was incorrect. We look forward to presenting our arguments to an appeals court, and believe they will agree that no sexual harassment took place and MSG acted properly."

And we thought Danny Ferry was a bad GM

I can't do any more justice to recapping the madness that is the Isiah Thomas sex harassment trial than Bill Simmons has done on espn.com's Page 2, here. Anyone care to predict the verdict? Putting all of the salacious allegations aside, if any one fact is going to doom the Knicks, it's the post-termination memo that came from the desk of the VP for Human Resources (which he denied writing) detailing the plaintiff's performance deficiencies in an attempt to justify her termination after the fact. Ouch.

Ohio Supreme Court rejects common law wrongful discharge age discrimination claim

In a 6-1 decision published today, the Ohio Supreme Court, in Leininger v. Pioneer National Latex, held: "A common-law tort claim for wrongful discharge based on Ohio's public policy against age discrimination does not exist, because the remedies in R.C. Chapter 4112 provide complete relief for a statutory claim of age discrimination. The Court concluded "that is is unnecessary to recognize a common-law tort claim when remedy provisions are an essential part of the statutes upon which the plaintiff depends for the public policy claim and when those remedies adequately protect society's interest by discouraging the wrongful conduct." Because R.C. 4112.02(N) and 4112.99 have broad remedial language allowing for the full panoply of legally recognized relief (i.e., back pay, front pay, compensatory damages, and punitive damages), the age discrimination statute adequately protects Ohio's strong policy against age discrimination and therefore a parallel common law claim is not needed.

This case is significant for two reasons. First, it continues the Ohio Supreme Court's trend towards the reinvigoration of employment at-will, which started in Wiles v. Medina Auto Parts (as an interesting side note, the same lawyer was on the losing side of both Wiles and Leininger). Given the decision in Wiles, though, Leininger's result is not a surprise.

Perhaps more significant is the underlying effect of this decision on the statute of limitations for age discrimination claims. Common law wrongful discharge claims have a four-year statute of limitations. Because state age discrimination claims are now limited to the statute, such claims will be controlled by the statute's 180-day statute of limitations for age claims (unless the employee elects to pursue the lesser remedies of reinstatement/back pay and attorneys' fees available under R.C. 4112.14 and its six-year statute of limitations). It is safe to assume that this case will also do away with public policy claims for all other forms of discrimination, although that effect will most likely not be felt, since R.C. 4112.99 has a six-year statute of limitations for all types of discrimination other than age. As a result of Leininger, and at least as far as state age claims are concerned, employers will have a greater degree of certainty regarding adverse employment decisions after six months (as opposed to four years) have elapsed.

Wage and hour litigation hits the big time

The Wall Street Journal Law Blog has also picked up this week's BusinessWeek cover story on the proliferation of wage and hour litigation and collective actions. The Journal quotes Rochester, New York, employee-side attorney J. Nelson Thomas, "This is the biggest problem for companies out there in the employment area by far. 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." Indeed, Mr. Nelson's law firm's website lists nine separate wage and hour class action lawsuits it is currently handling, against businesses such as Dick's Sporting Goods and NVR, Inc. (aka Ryan Homes), and as a reference for potential clients links to news articles on a half-dozen other successful multi-million dollar lawsuits for back overtime. I cannot stress enough, do not assume that your salaried employees are not entitled to overtime, and do not wait for Mr. Thomas to knock on your door before you figure out whether all of your employees are properly classified and are being paid all to which they are legally entitled. An internal wage and hour audit may cost a few extra dollars up front in legal expenses, but will be immeasurably less expensive in time, aggravation, and actual dollars than defending a wage and hour lawsuit.

Document, document, document!

As the record reflects, there was a myriad of problems with Plaintiff's job performance and treatment of his subordinates that justified Defendants' decision to fire Plaintiff. This, however, is not what Defendants told Plaintiff during their final meeting. Defendants did not tell Plaintiff he was being fired for poor performance, but rather because of an unspecified "personality conflict." While the law does not specifically require an employer to list every reason or incident that motivates its decision to terminate an employee, we are skeptical of undocumented accounts of employee conduct that may have been created post-termination. Under the facts of this case, however, ample evidence exists that indicates that Plaintiff's performance was inadequate to meet his job requirements. In sum, Plaintiff has not put forth sufficient evidence for a jury reasonably to conclude that Defendants did not have an honest belief that Plaintiff performed his job duties poorly.

So said the Sixth Circuit last week in Abdulnour v. Campbell Soup Supply Company, a national origin discrimination case brought by an Iraqi national fired by Campbell Soup for job performance that was less than "M'm M'm Good". The Sixth Circuit upheld the trial court's dismissal of the lawsuit on summary judgment because Abdulnour could not come forward with any evidence, other than his own subjective disagreement, that Campbell Soup did not honestly believe in the reasons proffered for his termination. Clearly, however, as the quote above demonstrates, the appellate court was troubled by the lack of documentation in Abdulnour's personnel file for the alleged performance deficiencies. It is safe to assume that if Abdulnour could have come forward with any evidence at all to support his allegation of pretext, the court would not have hesitated to ding the company for its poor documentation.

The lesson to be learned is basic, but one that cannot be repeated enough. Any employer's greatest defense against a claim of discrimination is a well-documented history of performance problems to support the termination, coupled with comparable treatment of similarly situated employees. When in doubt, document all performance problems with all employees. If the discipline or counseling is oral only, document that fact also. Have all employees sign off on all such records, and if the employee refuses to signify the receipt of the discipline, document that failure as well. The Sixth Circuit in the Abdulnour case cannot be any clearer that when an employer relies on undocumented accounts of misconduct to support a termination, it is fair for the court and a jury to draw the inference that those accounts were created post-termination. The Abdulnour decision is the anomaly, and almost universally cases with poorly documented personnel files will not end well for the employer. Campbell Soup dodged a bullet; do not put your company in similar risk.

Use a wage and hour audit to proactively head off claims

"Wage Wars: Workers are Winning Huge Overtime Lawsuits," graces the cover of this week's BusinessWeek magazine. It should serve as a harsh wake up call for all companies. The article cites recent huge wage and hour settlements and verdicts, including an $18 million settlement paid by Starbuck's and eight and nine figure jury verdicts against Wal-Mart. In fact, the article estimates that American companies have collectively paid over $1 billion to settle these types of claims over the past few years.

The sweatshops of the 1920s and 1930s that led to the passage of the Fair Labor Standards Act and its 40-hour workweek are virtually non-existent. Nonetheless, claims for unpaid overtime continue to rise, more than doubling in the federal courts from 2001 to 2006. Almost always, these cases are not the result of the intentional withholding of overtime premiums. Instead, they fall into two classes: off-the-clock pay claims and the misclassification of employees. The former concerns pay for working through lunch breaks, donning and doffing gear, and required travel time. Regarding the latter, employees fall into two basic classes for coverage by the FLSA, exempt and non-exempt. Companies and the employees themselves often mistakenly assume that white collar employees are exempt, and blue collar employees are not. Paying an employee a salary (as opposed to an hourly wage), however, is not enough to qualify an employee as exempt. The FLSA only provides an exemption if an employee meets the specific qualifications for the executive, administrative, professional, outside sales, or computer employee exemptions. These exemptions are highly fact specific, and wholly depend of the nature of the actual work performed, and not a job title. For example, merely labeling an employee as a manager or supervisor is not enough to qualify an employee for the executive exemption, unless that salaried employee customarily and regularly directs the work of two or more other employees, and has the authority to hire or fire. The other exemptions have similarly stringent requirements (click here for a copy of the federal regulations on these exemptions).

The question is not whether companies need to audit their workforces for wage and hour compliance, but whether they properly prioritize doing so before someone calls them on it. According to the BusinessWeek article: "While violations appear widespread, employees themselves rarely think to make wage and hour claims. Instead, they usually have it suggested to them by lawyers." It is immeasurably less expensive to get out in front of a potential problem and audit on the front-end instead of settling a claim on the back-end. The time for companies to get their hands around these confusing issues is now, and not when employees or their representatives start asking the difficult questions about how employees are classified and who is paid what.