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Labor Law: A $22 million wage verdict should send message to employers to comply with federal law

The U.S. Department of Labor has been awarded back wages of more than $22 million for over 7,500 employees working for East Penn Manufacturing Co., a large battery manufacturer. A federal jury concluded that the company failed to pay the employees overtime they were due as required by the Fair Labor Standards Act, passed in 1938.

The wage verdict is the largest on record obtained by the Labor department under the FLSA, it said in a news release.

The department also intends to ask for “liquidated damages” – an additional $22 million – for the workers, consistent with the penalties provided in the FLSA.

Under the FLSA, employers must pay employees for all hours worked and must also pay an overtime premium of 1.5 times the employee’s regular rate of pay for all hours worked over 40 in a workweek.

The department had already been awarded “summary judgment” (judgment as a matter of law) finding that the Lyons Station, Pennsylvania-based company violated the FLSA’s overtime requirement when it failed to pay uniformed workers for all working time.

The company violated the law by paying workers only for their eight-hour scheduled shift, and not for “additional time employees needed to put on and remove protective equipment and to shower to avoid the dangers of lead exposure and other hazards,” according to the department’s announcement of the verdict.

The department presented evidence at trial that the company did not pay employees based on their actual clock-in and clock-out times, but rather adjusted the timesheets to pay employees for only their scheduled shift. The company did this daily for every worker.

“Decades of settled law states that employers must pay employees for all hours worked, and this includes the time employees spend changing into and out of uniforms and showering where such activities, as here, were necessary and indispensable to their work. Contrary to the law, East Penn allowed employees to work off-the-clock for years,” Solicitor of Labor Seema Nanda said in the department’s news release. “The jury’s verdict will go a long way towards making the employees whole and serves as a stark reminder for employers like East Penn to think twice before instituting policies designed to skirt the law.”

Despite the decades-old FLSA, the law remains a mystery to many employers. The most common violations include:

Designating employees as exempt when they are nonexempt and entitled to overtime. Most employees are nonexempt because they perform nonexempt work. Employers too often assume that an employee must be doing exempt work if the employee does office work or is paid a salary. There are limited and narrow qualifiers for the exemption.

Paying only for scheduled work time and not actual time worked.

Failure to pay for “working time” or understanding what that is. In this case, the employer failed to pay for “donning and doffing” as required by the law. Employers also must pay, in some cases, when a worker travels, is “engaged to wait,” participates in training and when the employee takes short breaks of less than 20 minutes. While breaks are not required under federal law (some states require them), when an employer provides a break, the employer must comply with the FLSA.

Failure to properly compensate for meal periods. Although meal periods are not required under federal law (some states require them), a meal period of 30 minutes or more is uncompensated under the FLSA, but many employers interrupt the employee during meal period or ask that the employee eat while working. In these cases, the meal period must be paid. If an employee is asked to do a task 15 minutes into her lunch, the employee is entitled to a reset of the 30 minutes, not simply the 15-minute remaining balance of her meal period. An employee is entitled to compensation unless the employee is fully relieved of duty for at least 30 minutes or more. There remains a mystery in the law about whether an employee fully relieved of duty from 20 to 30 minutes can be considered a bona fide meal period.

Adjusting time records because the employee didn’t have permission to work overtime. An employee can be disciplined for working without approval, but the employee must be paid. Don’t adjust a time record when an employee works the time.

The law is old and antiquated, and doesn’t necessarily fit in today’s flexible work environment. Nonetheless, the law is here to stay, and employers must comply or face large penalties.


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