Judge Allows Class-Action Suit for Unpaid Overtime

By Maura Dolan and Lisa Girion, LA Times Staff Writers

SAN FRANCISCO — In a closely watched labor law case, the California Supreme Court cleared the way Thursday for a class-action lawsuit brought by Sav-on Drug Stores workers who say they were misclassified as managers and improperly denied overtime.

The unanimous ruling overturned a lower-court decision that would have discouraged such suits.

Plaintiffs’ attorneys maintain that many workers — despite being given titles such as “store manager” or “team leader” — spend most of their day on non-managerial tasks such as stocking shelves or tending a cash register, rather than overseeing any aspect of the business.

Companies had hoped that the lower court’s position would slow a wave of overtime litigation that has swept the state in recent years, costing firms hundreds of millions of dollars in judgments and settlements. A broad swath of corporate California has been hit, including Farmers Insurance Group, Bank of America Corp., RadioShack Corp., Rite Aid Corp., Starbucks Corp., Taco Bell Corp. and United Parcel Service Inc.

As a result of the high-court ruling, experts said, California businesses can expect a renewed surge of class-action litigation seeking overtime pay.

“There are probably a fair number of these lawsuits waiting in the wings for the court to clarify what the standards are,” said Steven Katz, a Los Angeles lawyer who wrote a friend-of-the-court brief for other businesses in the Sav-on case. “Now that that has happened, I think we’re going to see those suits being filed.”

A spokeswoman for Sav-on, which has about 300 stores in California, declined to comment on the ruling. Rex S. Heinke, a Los Angeles attorney who represented the drugstore chain, said he couldn’t comment because the litigation was ongoing.

The California Supreme Court ruling came the same week that new federal overtime regulations took effect. Those rules, which are expected to reduce the amount of overtime paid to workers and reduce litigation, were opposed by organized labor and embraced by the business community.

The federal regulations, however, are expected to have little effect in California, which has its own labor laws.

Under the state statutes, workers who spend more than 50% of their time performing the duties of hourly workers, even if they’re called managers, are eligible for overtime pay. Eligible workers who put in more than eight hours a day on the job are supposed to be paid for the overtime at time-and-a-half — 1.5 times their usual hourly rate.

Under federal law followed in most other states, managers may be exempt from overtime pay if their primary duties are supervisory.

The state high court’s decision stemmed from a lawsuit brought by two Sav-on managers who contended that the chain misclassified its assistant managers and operating managers as exempt from the state’s overtime wage laws.

Lawyers in the case have estimated that 600 to 1,400 Sav-on workers may be entitled to back pay if the lawsuit succeeds.

(emphasis added by me)

Employers have tried to use this trick for decades. First, back in the late 60’s, they started giving executives titles in lieu of pay raises (up until then, titles always came with raises attched–you got the raise by earning the title). That worked so well that by the 70’s it had come down the food chain: secretaries started to be called ‘administrative assistants’, even ‘executive assistants’–but no raise. In the 80’s it got picked up by Wal-Mart who took it right to the bottom: grunts were now ‘associates’ and told they were ‘in charge’–of shirts, toiletries, cat food, whatever.

But it didn’t stop there, oh no. Manufacturers tried calling their line workers ‘independent contractors’, and instead of paying everybody at the same scale, they ‘negotiated contracts’, hiring the lowest bidders and pitting worker-against-worker. The ‘independent contractor’ scam had the added attraction that they didn’t have to do withholding or pay their share to the unemployment fund: ‘independent contractors’ were legally considered self-employed and thus responsible for their own unemployment payments. The Duke–Michael Dukakis was Gov then–put an end to that scam, thankfully, but it was just one in a long line of anti-labor tricks designed to push down wages and shove all their responsibilities onto their workers.

That’s why the new overtime rules are evil: it took years of lawsuits and investigations and fines to get corporations to quit playing these games on their employees; the Imperial Overtime Decree basically puts us all back to Square One, and we’re going to have to fight the same damn battles all over again.

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