Nearly 9 million Americans lost their jobs because of the recession, prompting companies to find ways to pick up the slack.
Some of those efforts are clearly paying off for larger companies. S&P 500 firms made an average of $420,000 in revenue per employee in 2011—11 percent more than in 2007, a Wall Street Journal analysis found. Other strategies, which stretch the boundaries of the law, are biting back.
A growing number of current and former employees are suing employers in federal courts for wage and hour violations. In 2011, 7,006 wage-and-hour lawsuits were filed in federal courts, most of which were class action cases. That’s up 32 percent from 2008, and a 378 percent increase since 2000, according to an April report from law firm Seyfarth Shaw.
Last week Wal-Mart agreed to pay $4.8 million in back overtime wages and damages to 4,500 current and former store managers at Wal-Mart and Sam’s Club stores and warehouses, and in January drug maker Novartis agreed to pay out $99 million to 7,000 former and current sales representatives. Class action lawsuits waged by former employees of Staples Inc. and Dicks Sporting Goods Inc. ended in those companies agreeing to pay current and former managers $42 million and $15 million in overtime. Similar cases pending against GlaxoSmithKline, Bristol-Myers Squibb Co., and Johnson & Johnson currently await Supreme Court review.
The exploitive practice of pushing existing workers to essentially do two jobs at their own expense has not escaped government scrutiny. The Department of Labor recovered $225 million in back wages for employees in fiscal 2011, up from $176 million in 2010, and added 300 wage-and-hour investigators to its ranks over the past two years.
“It’s a very lucrative business practice to underpay your workers,” said Catherine Ruckelshaus, legal co-director of the National Employment Law Project, a research organization that advocates for workers. According to Ruckelshaus, while underpayment has been common for lower wage jobs like janitors, construction workers, and home-care workers for years, this recession ushered in an era of employers squeezing higher wage workers as well, Ruckelshaus said. “We’ve seen employers sometimes calling higher-wage workers exempt from overtime when they shouldn’t be exempt, or just asking employees to work off the clock because there are fewer workers around to do the same job,” Ruckelshaus said.
A law in place from 1938 called the Fair Labor Standards Act requires employers to pay workers at least the federal minimum wage, which is currently $7.25, for hours worked as well as overtime pay equal to one-and-a-half times the employee’s regular rate for hours worked in excess of forty per work week. Salaried employees are generally exempt from that rule if they are “employed in a bona fide executive, administrative, or professional capacity.” It is up to employers to determine which category workers fall into.