Employer Law Report : Employment and Labor Relations Lawyer & Attorney : Porter Wright's Employer Law Report : Employment Litigation, Non-Compete, Trade Secrets

Recent reports have indicated that the number of FLSA collective actions rose sharply in 2009. Many believe this trend will continue in 2010 as employees gain increased awareness of their rights under wage and hour laws and the plaintiffs' bar recognizes the potential value of FLSA collective actions.

Indeed, there has been a recent flurry of activity across the country in the area of wage and hour class actions. Assistant managers at Foot Locker Retail Inc. filed a nationwide collective action in the Southern District of California, alleging that the company misclassified them as exempt and failed to pay them overtime wages. Similarly, Vermont state employees have brought a putative class action under the FLSA, claiming that the state has failed to pay overtime to employees in higher pay grades. 

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On February 13, 2009, the U.S. Court of Appeals for the Ninth Circuit announced it will review the February 2007 decision to certify a class that potentially includes 1.5 million current and former female employees allegedly underpaid and denied promotion opportunities on the basis of their sex. As reported in our earlier post, this class has the potential to be the largest sexual discrimination suit in U.S. history and could be awarded potential damages into the billions of dollars. This class action was originally filed in 2001. Wal-Mart argued at the district court level and to the panel that the class should not be certified because of: due process difficulties in managing the trial of such a large class of individuals; differences between the class members—managers v. ordinary employees, former v. current employees, and geographic differences; the type of relief sought—allegedly not primarily injunctive; the lack of statistical evidence; and the alleged lack of standing of former employees included in the class. 

Employers should continue to watch the progress of this case through the courts because it will set a precedent for future cases where classes of employees nationwide challenge a uniform policy or corporate culture of stereotyping alleging that it influenced individual subjective decisions by individual managers. If this class is certified, it opens a door to class action challenges by enormous classes of past and present employees at all levels in the organization to nationwide broadly applicable policies and/or corporate culture. 

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Class actions, of course. California courts have preliminarily approved class-action settlements in two wage-and-hour lawsuits against the television networks and production companies responsible for such entertainment gems as “The Bachelor,” “The Bachelorette,” “Trading Spouses,” “Joe Millionaire,” and “My Big Fat Obnoxious Fiancee.” 

The lawsuits accused the companies of failing to pay overtime wages, denying meal and rest periods, falsifying pay stubs, and forcing employees to falsify time records. The companies will pay more than $4 million to settle the claims. A hearing for final approval of both settlements should take place in May 2009. 

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 From FedEx Corporation’s most recent 10Q filing comes the following:

“On December 20, 2007, the Internal Revenue Service (“IRS”) informed us that its audit team had concluded an audit for the 2002 calendar year regarding the classification of owner-operators at FedEx Ground. The IRS has tentatively concluded, subject to further discussion with us, that FedEx Ground’s pick-up-and-delivery owner-operators should be reclassified as employees for federal employment tax purposes. The IRS has indicated that it anticipates assessing tax and penalties of $319 million plus interest for 2002. Similar issues are under audit by the IRS for calendar years 2004 through 2006. We believe that we have strong defenses to the IRS’s tentative assessment and will vigorously defend our position, as we continue to believe that FedEx Ground’s owner-operators are independent contractors. Given the preliminary status of this matter, we cannot yet determine the amount or a reasonable range of potential loss. However, we do not believe that any loss is probable.”

With the IRS on its back and multiple class actions to defend, FedEx’s experience demonstrates the need for companies to consider very carefully their independent contractor arrangements to ensure that workers are properly classified. Given the IRS’s recent emphasis on this area, we suspect this is just the tip of a very large iceberg.

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