U.S. Labor Department Settles Its Own Decade-Long Overtime Battle for $7M

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The U.S. Department of Labor (DOL) is responsible for enforcing federal wage and hour laws, and a recent $7 million settlement with its own employees shows that the agency itself isn't immune to the rules.

In 2006, the American Federation of Government Employees Local 12 brought a collective action complaint on behalf of its members, asserting that the department's pay practices violated the Fair Labor Standards Act (FLSA).

The lawsuit alleged that employees worked off-the-clock hours without pay and weren't properly compensated when they worked more than 40 hours in a workweek. 

"A large portion of the settlement is allocated to back pay and to compensate employees who, in some cases, worked overtime hours for years without compensation," according to an Aug. 12 statement by Snider and Associates, a law firm in Baltimore that represented the union.

"It's fair to say no one on the planet cares more about the FLSA and securing compliance than the DOL," said Paul DeCamp, an attorney with Jackson Lewis in the Washington, D.C., area.

"Maybe this lawsuit points to the need to clarify the law. If the DOL can't get this right, what chance do other employers have?"

"Employers need to take a step back and ask how this could happen," he added. "When a model employer is in this situation, there must be something inherent in the FLSA that makes compliance elusive even for well-meaning employers."

"The case shows that these laws can be very difficult to master," noted Eric Meyer, an attorney with Dilworth Paxson in Philadelphia, who writes a blog called The Employer Handbook. "Even the most diligent and proactive employer can run afoul of the FLSA."

Workers Reclassified to Nonexempt

The settlement included claims that the department misclassified many workers under the FLSA's administrative exemption.

"It's always risky to rely on the administrative exemption, especially in a unionized environment," DeCamp said. 

To qualify for this white-collar exemption, an employee's primary duty must be directly related to the management or general business operations of the employer or its customers.

The employee's primary duty must also include "the exercise of discretion and independent judgment with respect to matters of significance," according to the FLSA.

Employers are often confused about how to properly apply this exemption to positions in their workplace.

"Maybe this lawsuit points to the need to clarify the law," DeCamp noted. "If the DOL can't get this right, what chance do other employers have?"

Labor Department spokesman Stephen Barr said that after the initial grievance was filed in 2006, the DOL took "numerous steps to enhance its pay practices."

"We reviewed all job positions, directed agencies to make corrections, revised guidance to supervisors on overtime eligibility issues and added internal controls on the department's timekeeping system," Barr said. "One example is that the department determined that about 500 positions should be made eligible for overtime under the FLSA … and corrected these in 2009."

The department didn't admit to any wrongdoing or FLSA violations in the settlement but said it was pleased with the agreement. 

"The Department of Labor strives to be a model employer," Barr noted. 

"The case was a battle," Keith Kauffman, an attorney with Snider and Associates, said in a statement. "The resolution was years in the making and eliminated the need for what could have been another decade of protracted and costly litigation."

Review Pay Practices

Many HR professionals are focusing their compliance efforts on the new salary threshold for the FLSA's white-collar exemptions.

Effective Dec. 1, the salary threshold for the administrative, executive and professional exemptions will increase from $23,660 to $47,476. Employees earning less than the threshold must be paid time-and-a-half for hours worked in excess of 40 in a workweek.

While employers should proactively ensure workplaces remain compliant with the new overtime salary level, this is also the perfect opportunity to address other wage and hour issues, Meyer said.

Employers should look at whether they have nonexempt employees who are working off the clock and whether managers are trained to know that nonexempt employees need to be compensated for those hours.  

"This has become a ripe area for collective and class actions, and people are paying more attention to it," Meyer added. 

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