AT&T’s overtime suit only latest

By Péralte C. Paul

The Atlanta Journal-Constitution

A lawsuit filed in Georgia last month marks AT&T as the latest major corporation to be accused of cheating workers out of overtime pay.

AT&T, which faces $1 billion in damages, joins Atlanta-based SunTrust Banks, the Family Dollar chain out of Matthews, N.C., and other firms across the country that have fought similar charges in recent years.

In fact, such lawsuits, stemming from alleged violations of the federal Fair Labor Standards Act, are on the rise according to a litigation study released last year by Seyfarth Shaw in Chicago.

And, with the economy still wobbly, experts predict increases in these claims.

At the crux of these suits is how companies classify workers. Whether an employee is entitled to overtime — compensation for working more than 40 hours in a given workweek — is based on certain functions of their job and whether that job is exempt, according to the FLSA.

An employee is considered exempt — or not eligible for overtime — if he works in an executive, administrative or professional function; is a computer worker; conducts outside sales; or is highly compensated. The FLSA has set guidelines detailing the criteria an employee has to meet to be considered exempt in each of those categories.

To be considered exempt in any of those categories, a person has to earn a base salary of at least $455 a week, according to FLSA regulations.

But there’s also a litmus test for each category that must be met to pass federal muster. For example, to meet the executive exemption, an employer must prove a particular worker’s primary role is managing a “customarily recognized department or subdivision of the enterprise,” the law states. That employee also must manage at least two full-time employees and have the power to hire or fire or weigh in on the hiring or promotion of a subordinate.

But for an outside sales exemption, the employer only needs to show the employee regularly works outside the company’s offices and his main job is to make sales or receive orders and contracts from customers.

“The law is clear-cut, but the application can have some variation in interpretation,” said Richard L. Kellner, a partner at Kabateck Brown Kellner. The Los Angeles firm has won several high-profile labor cases, including a $20 million settlement with Coca-Cola Bottling of Los Angeles in a case in which employees claimed they were denied legally required meal and break times.

The gray area comes in how companies define what they consider a manager, labor law experts say.

In the AT&T lawsuit, the plaintiffs’ main contention is the telecommunications giant reclassified the ranks of first-level managers as exempt but the bulk of their duties were nonmanagerial.

The difference can be razor thin, said Ellen C. Kearns, a leading expert in labor law and editor in chief of the 1999 book “The Fair Labor Standards Act.”

These cases are often expensive to try, costing at least $1 million to $2 million just to go into court, said Kearns, a former chairwoman of the American Bar Association’s federal labor standards committee. She heads the Boston office of the Atlanta-based labor law firm Constangy, Brooks & Smith.

Lawsuits such as the one AT&T now faces became more common after the U.S. Department of Labor tweaked some of the regulations in 2004 and many workers who were categorized as exempt found themselves misclassified, she said. That led to a wave of suits, particularly in the retail and medical employment sectors.