Wage laws, with 'gray' area, a legal minefield for retailers
Framingham-based TJX Cos. became the latest large retailer subject to a class-action lawsuit alleging federal and state wage law violations in December. Two assistant store managers from Texas and New York accused the company of failing to properly pay them for overtime hours worked.
The off-price retailer, which operates T.J. Maxx, Marshalls and HomeGoods, is not alone. A Dunkin Donuts franchise operator recently agreed to pay nearly $200,000 in unpaid overtime wages to store managers in 2013. And Apple Inc. is involved in a class-action lawsuit alleging the company did not pay employees for time spent having their personal bags searched upon clocking out, a safeguard against employee theft.
Is the TJX suit legit?
TJX does not comment on pending litigation. But it's likely that it has already cost the company much time and money to defend itself. This begs the question: Why would a retail giant, likely with plentiful legal resources, make itself vulnerable to a lawsuit of this nature by not properly compensating employees?
According to local legal experts, avoiding such legal disputes is a matter of classifying employees properly. And companies, large and small, encounter a lot of gray area here. This may explain why wage violation lawsuits are so commonplace, according to Seyfarth Shaw LLP, a global law firm that advises companies on employment issues.
The firm published a report in January 2013 that analyzed the incidence of employment-related disputes, and anticipated trends for the coming year. According to Seyfarth, wage-and-hour actions outpaced all other workplace class-action lawsuits in 2012, with 7,672 lawsuits claiming violations of the Fair Labor Standards Act, an increase of 893 cases from 2011.
TJX employees who alleged wage-law violations were assistant managers with annual salaries.They argue that the company was treating them as being exempt from the laws requiring overtime pay beyond 40 hours a week.
According to the lawsuit, filed in U.S. District Court in Massachusetts on Dec. 11, the employees spent well over half their time performing duties regularly handled by hourly employees, and TJX allegedly failed to keep adequate records of overtime hours worked.
But if a judge deems that the company misclassified the employees, they could have a case.
“Mistakes happen, I would say, mostly when employees are not classified correctly,” said Jonathan R. Sigel, a labor and employment attorney with Worcester-based Mirick O'Connell.
Sigel did not address the TJX case specifically. But he said that, often, if an employer is paying an employee a salary, they assume they're exempt from overtime pay, “and that's just not the case.”
Sigel summarized it this way:
An employee is nonexempt — and therefore eligible for overtime compensation — if he or she does not hold a position that involves using discretion and exercising independent judgment.
Sigel said such an employee might receive a salary rather than an hourly wage. But if he or she works more than 40 hours a week, the employer must calculate an hourly rate for the employee based on the salary, and pay time and a half for each hour worked beyond 40.
“It's very, very nuanced, and there's a lot of gray. Even for lawyers,” Sigel said.
Gary Goldberg, a Worcester-based employment law attorney, agreed.
“It's a question of independent judgment,” Goldberg said. He explained that a human resource manager with a certain level of discretion within an organization could safely be declared “exempt.” But a worker within an HR department is less likely to fit the definition.
Goldberg believes the businesses most at risk of misclassifying employees are smaller operations, where an office manager who does not enjoy a high level of authority may be asked to work long hours on a regular basis without pay.
The same goes for small retailers, according to Jon Hurst, president of the Retailers Association of Massachusetts. He is somewhat cynical about the motives of some of those filing lawsuits, and notes local retailers without large legal expense budgets can be set back significantly by such lawsuits.
Hurst recommends members educate themselves on classifying positions properly and clearly define employees' duties, as well as foster good employee communication. n
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