Legal Ease Wage Theft – Upping the Ante By Richard D. Alaniz, Alaniz Law & Associates O
n August 6, 2019, New Jersey became the fourth state to adopt a “wage theft” statute
for wage and hour violations. The new law provides for jail time in addition to increasing the fines for criminal convictions for underpaying workers. First-time offenders could face a fine of $500 to $4,000, imprisonment of 10-90 days, or both. It also allows workers to collect liquidated (double) damages in civil or criminal wage cases who now have up to six years to file a claim. This is all part of a growing response, especially in Blue states, to the problem of employers’ continuing failure to comply with wage and hour laws, whether it is the federal Fair Labor Standards Act (FLSA), or similar laws at the state level.
Failure to Pay Overtime Under both the federal and state laws, the most common claims involve the failure to pay overtime. In most cases the failure is caused by an employer treating an employee as exempt from overtime when they are not properly qualified for the exemption. Under both the FLSA and most state wage and hour laws, paying an employee a salary does not automatically make them exempt from overtime. In order to be exempt, the employee must satisfy the criteria under what is known as the “white collar” exemptions. The main categories are “executive”, “administrative”, “professional”, and “outside sales”. In all but the “outside sales” category, the person must satisfy two separate tests – the salary test and the duties test. Under the FLSA currently the required salary is $23,660 per year, or $455 dollars per week. The state salary requirements vary, with some similar to the federal level and others substantially higher. There is a pending Department of Labor rule to increase the federal required salary for exempt status to $35,308 per year, or
52 ❘ September 2019 ®
$679 per week. The “duties” test that must also
be satisfied varies with each of the exemptions. In the case of the “executive” exemption, in order to satisfy the test, the person must have as their primary duty the management of a company, department or other subdivision of the enterprise. They must also direct at least 2 employees and have the authority to hire, fire, promote or to effectively recommend such actions. The exemption includes such people as managers, supervisors and others with similar authority. To meet the duties test for the “administrative” exemption the person, must work in a non-manual job that includes as its primary duty, the exercise of discretion and independent judgement with regard to business matters of significance. Positions that have historically been covered by this exemption are insurance claim adjusters, executive assistants, human resources personnel, purchasing agents, buyers and other jobs with similar responsibilities. The “professional” exemption generally applies to positions requiring advanced knowledge in a specialized field of science or learning acquired by a prolonged course of intellectual instruction. This exemption generally applies to lawyers, doctors, pharmacists, architects, engineers and similar occupations. The “outside sales” exemption requires that the person’s primary duties consist of making sales while customarily away from the employer’s place of business. Unlike the other exemptions, there is no minimum salary requirement. The exemption does not apply to inside sales employees. There is no longer any requirement that exempt employees spend a certain percentage of their time in exempt duties. This means that they can engage in non-exempt duties as long as their primary responsibility is to perform exempt functions.
Not Paying Employees for All Time Worked When employees are not paid for all hours worked, the employer is considered to be in violation of both the FLSA and any applicable state wage and hour laws. It is not always misclassification that causes the violation. In some cases, overtime liability is generated by an employer
failing to pay non-exempt
employees for their off-the-clock work. There is likely even if the employer was unaware that such work was being performed and never asked that it be done. It frequently involves work-related activity done before or after the official workday.
A non-exempt employee
responding to work e-mails after hours is one example that has drawn increasing attention. If the additional unpaid time takes the weekly total over 40 hours, then overtime is due the employee. All employers should consider providing employees clear notice that all off-the- clock work must be reported and that no overtime work may be performed without proper authorization.
State Specific Issues Wage and hour claims are the most frequently filed claims against employers. In states with complex and strict wage laws like California, the majority of cases pending in the courts relate to such claims. Aside from the fact that many, if not most, employers inadvertently violate wage and hour laws, there are several other equally fundamental reasons so many cases are filed. Wage and hour claims generally have a three (3) year statute of limitations. In addition, the liability almost always results in liquidated damages – double damages. And to make such cases even more attractive for Plaintiff lawyers, the employer is liable for all the employee’s attorney’s fees.
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