Class-action lawsuits for meal- and rest-period violations will likely rise in 2008 along with litigation involving retaliation claims, according to a panel of experts recently convened by The Daily Transcript.
Wage-and-hour lawsuits, which have increased considerably in recent years, could get worse for employers, especially after the state Supreme Court ruled that the hour of pay employers owe for meal-period violations is a penalty and not a wage. That distinction means the statute of limitations for such claims reaches back four years instead of just one.
"That makes it a much bigger liability for employers and a much more attractive lawsuit for the plaintiff's bar," said Craig Hunsaker, a San Diego labor and employment attorney. "So employers need to be very aware of how they classify their work force and how they give meal and break periods."
Hunsaker, managing partner of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo's San Diego office, was speaking at a roundtable discussion on labor and employment issues moderated by Daily Transcript Executive Editor George Chamberlain and sponsored by Mintz Levin.
The companies most at risk of getting sued, according to Hunsaker, are startups, emerging-growth and middle-market companies that are still developing their policies and procedures. Some problems can occur when the companies misclassify certain workers as being exempt, which means they aren't entitled to overtime or rest-period compensation.
"So they have this trailing liability they just don't know about," Hunsaker said.
With the stakes so high, there is some debate over whether employers have to force their employees to take breaks or whether simply providing for a rest period is enough to satisfy their responsibility.
Just in case, several companies are using software that automatically alerts them when an employee has missed his or her meal period, according to Michelle Adams, senior employment counsel for Accredited Home Lenders Inc. The program automatically pays the one-hour penalty and then allows company officials to reprimand the employee. It's used to prevent liability from accruing for several years.
"There are cultural challenges with that," Hunsaker said. "What manager wants to discipline their employees (for missing a break)? Some want to work harder.
"It's a hard law, given the way it's been interpreted historically, for employers to administer."
Adams said it's particularly difficult to enforce on sales employees who work on commission.
"They want to work very long hours," she said.
The law was originally intended to protect employees from companies who were overtaxing their work force. Some employees, however, would like the option of working through lunch, especially if it means leaving early at the end of a shift.
"The law doesn't provide for the ability to be flexible," said Anne Minteer, a senior attorney for Cubic Corp. (AMEX: CUB).
"I think if there ends up being a shift in the law, it'll be because employees demand it, because they want this flexibility," agreed Mintz Levin's Hunsaker.
While employers need to properly distinguish between exempt and non-exempt employees, they also have to be careful of another classification issue, according to Mitch Danzig, an employment attorney with Mintz Levin. Determining whether someone is a contractor -- and therefore not entitled to benefits -- or a company employee is important, he said.
According to Danzig, most of the decisions last year have gone against employers, finding they misclassified employees as contractors.
"Those decisions could have a far reaching impact," Danzig said. "We'll see in the coming year more plaintiffs lawyers being encouraged to pursue that as a class action as well."
One type of litigation that isn't necessarily increasing is discrimination claims, according to the panel, partly because of a recent law that requires companies to have their managers take sexual harassment preventing training.
But retaliation claims -- when employees feel they are being retaliated against for making a discrimination claim -- are now becoming the focus. The definition of retaliation is broad and isn't confined to being fired. A bad performance review can be considered retaliation.
The best way for companies to protect themselves is to take every complaint seriously, said Cubic's Minteer.
"What you have to do as a company, what we try to do, is have this culture that really embraces complaints," Minteer said. "We don't want (managers) to look at it as a negative or as a waste of time."
Mintz Levin's Hunsaker said managers shouldn't try to handle the claim alone, but should investigate it properly.
Adams, the counsel for Accredited, goes one step further.
"I don't really like my employees bringing complaints to managers," she said. "I like them to bring it straight to HR. They're the ones trained to handle complaints."
Managers should also be mindful of how they communicate to employees. Most write e-mails and those correspondences, which aren't protected, can become evidence at a trial.
"You have to train people to look at e-mail as public record, and they should be careful of what they write," Minteer said.
Technology has changed the workplace in a lot of additional ways, including allowing people to work from home. This makes it difficult when classifying members of a work force, Mintz Levin's Danzig said.
"The law keeping up with technology is a major issue ... it has been for quite a while," he said. "We're not in the industrial age anymore. We have a lot of challenges that we're facing now because the law simply has not come close to what the changing nature of the workplace is."