If you work more than 40 hours a week, you are normally entitled to be paid time and a half for any additional hours. Unpaid overtime class actions are multiplying as employees who once thought they were not eligible for overtime now realize that they, in fact, are covered by the law. In November, International Business Machines Corp. agreed to pay $65 million to 32,000 so-called technology workers to settle a class-action lawsuit alleging that they were wrongly classified as overtime exempt professionals and had to work more than 40 hours per week and on weekends without extra pay.
Earlier in the year, major brokerage firms such as Smith Barney and UBS Financial Services paid $98 million and $87 million respectively to settle unpaid overtime class actions brought by stockbrokers. Today, most of the world's major pharmaceutical companies are under siege in New York and elsewhere from a flurry of class action suits alleging that they have improperly classified workers as outside salespeople, an employee category normally exempt from overtime provisions.A decade ago, such claims by people who had for generations been deemed exempt because they were considered salespeople, professionals or even managers were rare. But the number of such cases in federal courts has more than doubled between 2001 and 2006. (There are also an increasing number of unpaid overtime cases involving how the basic 40-hour workweek is calculated.)
"Violations are a huge concern," says Leo Rosales, spokesperson for the New York State Department of Labor. "Many people simply don't know the law and the rights they have."
The changing workplace is behind the new activism among employees. "The shift from the production of goods to a service economy involves jobs that are less prescribed than before," says Jim Melius, a senior official with the New York State Laborers' Union. "In the traditional manufacturing environment, the division between a manager and a worker was relatively clear. But as the nature of work has changed, a lot of people don't fall so easily into traditional categories."
Take the pharmaceutical sales reps. They claim they don't actually sell anything. Nor do they exercise independent judgment. They say they spend 50 to 70 hours per week, including nights and weekends, visiting doctors' offices where they deliver a memorized, management-written and choreographed script.
In the current environment, the overtime stakes are high on both sides. Says Melius: "From a corporate perspective, if you have lots of people who fall into a challenged category, the cost can be many millions of dollars." From the employee perspective "wages have not kept up with economic growth, and overtime pay becomes even more important."
Some employers try to avoid paying overtime by promoting employees to managerial positions. A higher salary to compensate for the loss of overtime income usually accompanies the promotion. But the pay increase often does not approach the loss. And in other cases, the promotion is a paper one only, as Starbucks found out. The company had to pay $18 million to settle one class action alleging that its managers performed the same duties as its baristas and were, therefore, entitled to overtime.
In New York State, where federal standards generally apply, the governing principle is that all workers are entitled to overtime, unless an employer can demonstrate they are exempt. There are several criteria that determine exemption. Some are relatively straightforward. An employee must be paid on a salaried, as opposed to commission, basis. And a worker's salary must be at least $455 per week, or $23,660 per year.
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The bottom line is that the law and the courts, not your employer, determine whether you are entitled to overtime. Melius's advice to all employees: "Be aware of how you are classified and be wary of any change in your job that could deprive you of overtime."
By Michael Benedic
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