Wage and Hour Trends

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April 17, 2006

I. Wage/Hour Claims. The number of minimum wage and overtime pay lawsuits filed under the Fair Labor Standards Act (FLSA) has increased sharply in recent years. After consistently being between 1,000 and 2,000 a year during the 1990s, the number of lawsuits has risen steadily since 2000. By 2004, the annual number of filings has risen to 3,617. Certain reports claim the rise in lawsuits is a result of the confusion that resulted from issuing the revised white collar exemption regulations in 2004. However, some experts are of the opinion that the difference between the FLSA and state laws is behind the rising number of lawsuits. Certain states, including California, Illinois, New Jersey, and, in some areas, Wisconsin, – have laws that are more stringent than the FLSA. For example, Wisconsin has not adopted the revisions to the white collar exemptions that were issued in 2004. Experts claim the plaintiffs’ attorneys have been successfully exploiting an employer’s ignorance of these differences in recent years. Although the number of lawsuits has risen, the number of employees receiving back pay and the amount of the back pay resulting from federal investigations under the FLSA have declined significantly in the last several years. The Department of Labor’s Deputy Administrator attributes the decrease in back pay compensation to the complexity of the recent cases and the fact that many large cases concluded in fiscal year 2003. II. Commissioned Sales Employees. An association of more than 4,300 health and athletic clubs asked the Department of Labor (DOL) whether some of its employees – such as personal trainers, aerobics instructors, and tennis professionals – who were paid a commission may be exempt from the overtime pay requirements under the FLSA pursuant to the exemption for “inside sales” employees. The inside-sales exemption is so named to distinguish it from a separate exemption for “outside sales persons,” such as door-to-door salesmen, promoters, and some real estate agents. The employees at issue in this matter were paid what constituted a flat fee. The DOL ruled that inside sales employees must be paid a commission that represents the percentage of what customers are charged. If inside sales personnel are paid a flat fee, such as the case with the health/athletic clubs, they would not qualify for the exemption. The DOL stated: Employees paid a flat fee . . . appear likely to earn the same amount each week in violation of FLSA rules governing commissions (29 C.F.R. Section 779.416) states that sales person’s commission must reflect the value of the goods sold or the service performed, and must not always or almost always be same fixed amount. Wage and Hour Opinion Letter 11/14/05. If you have questions regarding the above, please contact any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.

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