Conditional Certification Granted in Case Involving "Independent Contractors"

The federal court in Nashville just granted conditional certification in a case where we serve as class counsel. It alleges that ECT Contracting, who installs satellite TV dishes, misclassified workers as "contractors." This allowed them to avoid paying overtime to numerous workers. The case is Johnson et al v. ECT Contracting in the United States District Court for the Middle District of Tennessee. I encourage anyone who is classified as a "contractor" to contact me or some other experienced wage and hour lawyer to determine whether you have been misclassified.

Following up on my last post, the New York Times published a similar article about federal and local governments' newfound interest in empoyers who misclassify employees as "contractors" to avoid overtime and payroll tax obligations. The article, by Steven Greenhouse, was published on February 17, 2010. The following is a summary provided by the National Wage and Hour Clearinghouse:

Federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors. President Obama’s 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years. More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.
Many workplace experts say a growing number of companies have maneuvered to cut costs by wrongly classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees. Moreover, the experts say, workers have become more reluctant to challenge such practices, given the tough job market.
Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers. Companies do not withhold income taxes from contractors’ paychecks, and several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income.
One federal study concluded that employers illegally passed off 3.4 million regular workers as contractors, while the Labor Department estimates that up to 30 percent of companies misclassify employees. Ohio’s attorney general estimates that his state has 92,500 misclassified workers, which has cost the state up to $35 million a year in unemployment insurance taxes, up to $103 million in workers’ compensation premiums and up to $223 million in income tax revenue

Independent Contractor Misclassification Article

I came across an article in our local Memphis newspaper that confirms a trend I have seen developing. More and more employers are arbitrarily calling employees "contractors" in an effort to avoid paying overtime and payroll taxes. This is just another form of wage theft. In some ways, it is even worse. Not only does it deprive the employee of wages, but it also places an illegal tax burden on the worker.

This seems to be especially bad in the construction business. To read the article from the Commercial Appeal in Memphis, follow this link: http://www.commercialappeal.com/news/2010/feb/12/irs-states-probe-contractor-abuses/

Automatic Meal Break Deductions: Nurses are Frequent Victims of Wage Theft

I have recently filed a number of claims on behalf of employees at major hospitals. It is an industry practice for hospitals to automatically deduct employees' meal breaks from their pay, regardless of whether they are actually able to take it. Generally, an employer cannot deduct a 30 minute meal break unless the employee actually gets to take an UNINTERRUPTED break. This is an especially significant problem for nurses. The pure nature of their job frequently makes it impossible to take an uninterrupted meal break. It is the employer's obligation to make sure their employees are able to take meal breaks in these circumstances. Health care providers are true heros in our society. It is crucial to make sure they are fairly paid for all of the time they give to their profession.

Budget Brakes Overtime Case Certified

We have a case against Budget Brakes, a chain of automobile service shops in Middle Tennessee. Judge Campbell of the United States District Court recently granted our Motion for Conditional Certification on this case, and notices will be sent to prospective class members shortly.

This case highlights the rights of employees to be paid for every minute they work. We allege that the company has a computer system that automatically deducts employees' lunch breaks. Unfortunately, employees are frequently unable to take all (and sometimes any) of their lunch break. This results in a significant amount of unpaid wages over an extended period of time. Stay tuned, and I'll keep everyone updated on this case.

Starbucks Overtime Lawsuit

I've had lots of comments from people who read my post about the Family Dollar case. It was unusual because most FLSA cases involving the executive exemption are filed by assistant managers. The Family Dollar case involved store managers. This may be a trend, with Starbucks being the latest employer to run afoul wage and hour laws. The following is part of the article I came across:

Boca Raton, Fl: You can bet your double latte that some people are wondering why they took that management job at Starbucks. The high-end java shop has been slapped with yet another overtime lawsuit under the Fair Labor Standards Act—this time it’s the managers that are complaining that they were, as attorney Adam Chotiner describes it, “little more than glorified baristas." Chotiner believes that Starbucks has wrongly classified store managers as beingexempt from overtime. “We don’t believe they fit the exemption,” says Chotiner. “Their primary duty is to make coffee, sell coffee, serve coffee and clean the bathrooms just like the hourly employees they supposedly supervise. They should receive overtime pay for any hours they worked over 40 hours but they don’t.” Although Starbucks store managers get a little prestige from their title, Chotiner argues that’s about all they get that is different from the baristas. It may be that it simply doesn’t pay to be the coffee boss. “Certainly that is one of things we are going to explore. We think if you take their salary and divide it by the number of hours they really work,” Chotiner says, “you will find that on an hourly basis they make very similar to what the hourly employees make.”

You can read the full story at www.lawyersandsettlements.com/articles/12217/Adam-Chotiner-lawyer-interview.html

U.S. Supreme Court Decides Case From Tennessee

On January 26, 2009, the United States Supreme Court handed down its opinion in the case of Crawford v. Metropolitan Government of Nashville and Davidson County. The Court held that Title VII’s antiretaliation provision protects an employee who speaks out about discrimination in answering questions during an employer’s internal investigation. The opinion, authored by Justice Souter, said that such speech is protected under the statute's “opposition” clause and that Title VII does not call for "a freakish rule protecting an employee who reports discrimination on her own initiative but not one who reports the same discrimination in the same words when asked a question.”

Eleventh Circuit Affirms Major FLSA Verdict for Employees

The Eleventh Circuit recently upheld a major verdict for managers of Family Dollars Stores. The employees claimed that they worked 60 to 70 hours per week without receiving overtime pay. The Defendnat claimed the executive exemption. The Eleventh Circuit affirmed a trial verdict for the Plaintiffs.

The case involved an opt-in class of 1,424 store managers in a collective action under the Fair Labor Standards Act. The Eleventh Circuit wrote:

"Plaintiffs presented evidence that store managers rarely exercised discretion because either the operations manuals or the district managers’ directives controlled virtually every aspect of a store’s day-today operations. The manuals and other corporate directives micro-managed the days and hours of store operations, the number of key sets for each store, who may possess the key sets, entire store layouts, the selection, presentation, and pricing of merchandise, promotions, payroll budgets, and staffing levels. The manuals even instruct store managers on the smallest details, such as how to arrange clip boards, what items go in each of the four drawers of the single file cabinet, and how to remove spots and chewing gum from store mats. The few decisions not mandated by the manuals and corporate headquarters are vested in the district manager. These decisions include the power to change store hours, close for bad weather, approve changes to store layouts, establish all employees’ initial rates of pay, approve all pay raises, set payroll budgets, control the total labor hours allocated to each store, approve the hiring and firing of assistant managers, and even approve the use of appliances such as coffee pots. Even when a store manager exercised discretion in scheduling employees for the week, she did so within the strict constraints of mandatory store hours, a limited payroll budget, a prohibition on overtime work by hourly employees, and a staff scheduler. This evidence supports a reasonable jury finding that Family Dollar’s store managers had few, and infrequently exercised, discretionary powers. "

One of the most damaging pieces of evidence was the testimony of Dollar Stores' Senior Vice President of Store Operations. He testified -- or attempted to testify -- about how the company reached its decision to classify all its store managers as exempt:

Q. Now, my question is, did you make that decision?
A. No, sir.
Q. Did your boss, Mr. Barkus, make that decision?
A. To my knowledge, it’s been in place -- it was in place when I camehere 29 years ago. So --
Q. Okay. So, do you know anybody that will own up to that decision;say, “that was my decision”?
A. I do not.
Q. Mr. Levine, has he ever told you that’s his decision?
A. No, sir.
Q. Can you give us any clue? And the reason I’m asking you this, Iasked you this in the deposition and we’ve been asking a lot of peoplein depositions: Who made this decision, do you know?
A. I do not.