Boss Steals From His Employees to Line His Own Pockets.

Imagine two restaurants. Right next to each other. On the same block.


Both serve food and alcohol. Both employ cooks, wait staff and dishwashers.


There is equal foot traffic and signage, and neither restaurant is any worse in any outward way than the other.


But one of their owners seems to be making a lot more money.


The other is keeping the lights on, paying the bills, and making a living. But he isn't flashing big stacks. What gives?


One of them isn't paying his employees even minimum wage. He isn't paying payroll taxes, Social Security contributions, unemployment insurance or workers compensation. He's stealing wages from his employees. Current wages, future benefits, and by failing to pay into the employees' funds, the safety of Social Security.


If someone working for the wage thief gets fired or laid off, and they apply for unemployment insurance, they'll find they were never recorded as employed. They will discover their boss never paid unemployment insurance taxes.


     "Sorry, no unemployment benefits for you."


Or pray for good fortune if an employee slices open a finger, or slips down some stairs. No workers compensation for that one. The boss never bothered paying those premiums, either. Better hope no infection sets in.


It happens. All. The. Time. Here is a real life example, a case my clients brought to recover unpaid wages: Hamilton v. Buck's 24-Hour Diner, LP

Litigators gotta litigate

2014 saw my litigation practice suffer a bit. 2012 and 2013 were banner years, but last year it seemed that nobody was angry or cheated enough to sue. Or they just weren't interested in talking to a lawyer about it. This year? Much different.


Since January I have filed 4 unpaid overtime cases in federal court, and one, a mortgage loan officer case, is teed up to go. Mortgage loan officers are NOT exempt from minimum wage or overtime coverage.


Also in the just-about-to-be-filed pipeline is a clear failure-to-notify FMLA case. It amazes me how often the employers in these cases are health care providers. There is another FMLA case right behind this one, but its major claim is failure to reinstate. Either way, back wages, liquidated damages and attorney's fees are all available.


I haven't seen this much action in years and am grateful for my tax dollars being used to support a dispute resolution system for people who have few resources and little power.


If employers make employees angry enough or treat them unfairly long enough, then those employees will act. Employment laws passed by Congresses not so deeply in corporate pockets serve these underpaid or mistreated workers well.


Don't take it anymore. Call a lawyer.


Update:


Favorably settled the mortgage loan officer overtime case and both FMLA cases this year.  Still two more in play and I am looking for more. Merry Christmas and Happy New Year to all.

The low hanging fruit of the FLSA is gone.

I filed my first FLSA collective action in 2001. That was the boom time. The previously unsexy wage and hour claim had come to life. Plaintiffs' counsel were recognizing the great value of statutory attorney fees under a remedial statute coupled with a whole lot of unsuspecting employers.  Life was good and lucrative for more than a decade.


Now though, most employers of any size or sophistication are aware of the risks from unpaid OT or misclassification. Plaintiffs are relegated to rooting around in the cast-off theories of recovery. Big, valuable defendants are mostly gone.  


This well has been worked. Until there is a fracking analogue for FLSA claims, something that can pull more recoveries out of old theories, it is probably time to pull in the pipes and move on.


I know, I know. More than 8,400 FLSA cases were filed in 2012. It's popular. It's booming. How many were filed in 2001? Less than a 1,850. See, http://www.gao.gov/assets/670/660319.txt.  A 450% gain in a decade is quite a run.


But borrowing a phrase from the investment world: When everyone goes to one side of the ship, it's time to go to the other side. The Johnny-come-lately staffing by employer defense firms over the past two or three years seals it for me. By the time the Ogletree Deakins of the legal world got on board big time, the top in FLSA claims was near.


For lawyers looking for valuable practice areas, and I am speaking only from personal experience and my own observation-based opinion, the FLSA is played out. There are better opportunities elsewhere.

The FLSA loves employees and their lawyers.

The federal Fair Labor Standards Act, also known as FLSA (pronounced Full-sa), is the law that requires employers to pay employees overtime wages for weekly hours worked in excess of forty.  It has been around since 1938, with some modifications on the way.

Several employee friendly clauses were built into the law and its regulations.  There have also been thousands of court decisions that have added weight to the statute.  All that being said, the FLSA has become an extremely useful tool for employee representatives.

A couple of quirks that a lawyer or an employee should know:  Employers can't shield themselves from personal liability.  Very often large and small businesses are incorporated into corporations or limited liability companies.  These legal creations usually insulate officers and owners from financial liability for actions of the corporation.  However, the FLSA broadly defines "employer" as any entity or person that has control or influence over the employees' hours of work and pay.  I have surprised many owners and managers and their lawyers by attaching personal liability for unpaid wages.

Next on the list of powerful benefits is the requirement that employers maintain records of hours

worked by, and payments made to, their employees.  The law requires a rolling three year maintenance of this information.  When there is a dispute about whether an employee worked overtime, an employer's failure to produce the records of hours worked and pay earned is a killer.  The law specifically requires that the employer maintain them.  Courts have consistently held, over decades, that in the absence of contemporaneously created records, the employee's estimate of hours worked controls.  In the absence of specific evidence to contradict the employee's estimate (like time cards) the Court will allow the employee's estimate to stand as the amount of hours worked.  An employer can't complain about the estimate when they fail to keep the lawfully required records.

Even employees who are classified as salary exempt should have time records maintained for them.  At a minimum the smart employer will record that they worked the expected amount of hours in a work week. If there is any doubt about whether the employee is exempt from overtime, even a shred of doubt, then the conservative employer will keep detailed records.  

Rounding out this incomplete list of unique FLSA features is the liquidated damage and attorney's fees provision.  Under §216 of the FLSA, an employer who is shown to have violated the law is required to pay the back wages, an equal amount in additional damages, and the employee's attorney's fees.  Congressmen in 1938 expected that the unpaid wages may be less than the attorney's fees, and Courts have consistently awarded fees based on comparable attorney rates in the geographic area where the case is tried.  Needless to say, the awards of fees can be significant. 

An employer and his lawyer ought to take claims of unpaid overtime very seriously from the first moment they are raised.  The risks of allowing litigation to proceed can well exceed an early payment of the wages that should have been paid on demand and investigation.

I had a case a few years ago where I was trying to get the employer's attorney to discuss a settlement for my six employee clients.  The attorney was unaware of the FLSA risks and finally said "you're being tiresome, go ahead and sue us."  I did and got an award the defendant is still paying, with attorney's fees in excess of the back wages. 

The FLSA is the best friend to an employee and the employee's lawyer.  It is still not very well known by employers and their lawyers, but 7,000 federal cases a year are bringing them around.  The bottom line is that is best to take allegations of FLSA violations very seriously and very quickly, before attorney's fees exceed what any employer would have anticipated.  

More information available on my website:  www.LangendorfLaw.com

Glorious blatant misclassification

Employees misclassified as independent contractors present great opportunities for major recoveries of unpaid wages and overtime.  

Undercapitalized or greedy contractors bid jobs low on the basis of low cost labor.  They will bid low because they know they can pay their laborers straight time for their hours, no matter how many, and most of those laborers will be glad to be getting paid.

Some contractors tell their employees that they will be classified as contractors and will not get unemployment insurance or workers comp. or have taxes taken from their pay, or get overtime.  The employees think this is fine.  All they hear is "no taxes." 

Prevailing wage states require contractors working on state funded jobs to pay their employees an inflated wage similar to what the local union members would get for the same work.  It's an incentive to hire union members.  The catch is that independent contractors don't have to receive prevailing wage.  They get paid for the job.  So, unscrupulous subcontractors purposely mis-classify their employees as subcontractors and then deny them the prevailing wages they are due on the grounds that they are not employees and are merely getting paid for the job. 

Even when they think they are right, they are wrong.  Some of these contractors will even issue paychecks from their in-house payroll system, to their "independent contractor" employees, showing pay for say 56 hours at regular pay for a week.  This is printed above the "overtime" line which shows 0 hours and $0.  That's 16 hours of overtime paid at the regular rate.  This violation sets up damages equal to 16 hours at the regular rate.  And that is just for one week.  Think three years of this nonsense, for multiple employees, and add in attorney's fees.  That's right, it gets big fast.

These willful violations of the Federal Fair Labor Standards act lead to three years of trailing liability and liquidated damages, not to mention attorney's fees.  Thanks to Zavala v. Wal Mart Stores, an unpaid overtime case out the federal District Court of New Jersey, liability for unpaid wages can extend to the general contractor or the owner of the job.

This kind of case makes me tingle all over. 

Offers of Judgment

Rule 68 of the federal rules of civil procedure operates to put plaintiffs suing for damages on a defensive footing.  If a defendant wants to shake a poorly financed plaintiff off their attack, then the defendant will make an offer of judgement.  In an unpaid overtime case brought under the Fair Labor Standards Act the offer has to include an amount of damages AND an offer to pay the plaintiff's attorneys fees. This damages plus requirement is a function of the mandatory fee shifting required by the FLSA.

The offer has strict time limits and because it is made by letter from defendant's counsel to plaintiff's counsel with varying terms, it can be confusing in its form.  Offers are enforced using the principles of contract law and they are often effective.

I hate them.

Today finds me working on a motion to certify a class/collective action in an unpaid overtime case in the Federal Southern District Court of Ohio.   The issue is whether the employer's shifting of a seven day workweek, seven, twelve-hour-a-day workweek at that, over two calendar weeks, without paying any overtime, is lawful.  I say no.

Of course the employer says "Sure, it's lawful.  We can designate any period as a workweek.  Haven't you seen the regulations that say workweeks don't have to be the same as calendar weeks or pay periods?" while citing to 29 CFR 778.105.  "Look at the regulations Langendorf," they say.

I have.  I conclude differently.  The regulation that says a workweek is a seven consecutive day period is the period upon which overtime is calculated and each workweek stands alone. 29 CFR 778.104.  My clients work a seven day on, seven day off schedule repeatedly.  The employer calls it a "seven on seven off" schedule.  They don't call it a "three off, four on, three on four off"  schedule.  It's seven on seven off.  If the employees worked Sunday to Saturday, they'd get 44 hours of overtime pay. The way the employer has interpreted the workweek regs, the employees get no overtime at all.  Despite being subjected to a grueling schedule the likes of which the Fair Labor Standards Act was supposed to eliminate, BY ITS OWN TERMS.

The relevant regs have been interpreted in favor of employers, for the most part.  But this misuse, this cheap end around, needs to be changed.  I'm on it.