The settlement was reached in a putative class action suit originally filed on April 17, 2008.  The suit, Danieli et al. v. IBM Corp., alleged that IBM misclassified thousands of employees as exempt from the Fair Labor Standard Act’s (“FLSA”) overtime pay requirements.  The plaintiffs claim that as a result of this misclassification, they were underpaid and failed to receive credit for overtime compensation for their retirement plan as required by the Employee Retirement Income Security Act.  The settlement provides $7.5 million including up to $2.5 million going towards attorney’s fees and $150,000 for litigation expenses.  The settlement also stipulated that employees in California will receive a higher share due to the stronger claims made under California state law.

According to the settlement agreement, the motivation for the settlement on both sides included the uncertainty in the duration of future litigation as well as amount recovered.  Excess costs predicted and accounted for but not spent as well as un-cashed settlement checks will be donated to the Habitat for Humanity.

A copy the Settlement is available here.  For information on The Employment Law Group® law firm’s Overtime Practice, click here.

On Wednesday, October 14, 2009, the Secretary of Labor submitted an amicus curiae brief supporting the position of over 2,500 pharmaceutical sales representatives seeking payment for overtime.  The brief claims that the U.S. District Court for the Southern District of New York erred when it found that Novartis Pharmaceutical sales representatives are exempt from the overtime provisions of the Fair Labor Standards Act (“FLSA”).

At issue is whether the sales representatives were exempt under either the “outside sales” or “administrative” exemptions.  While pharmaceutical sales representatives engage in a number of activities similar to an “outside salesman,” no actual sales take place.  In fact, such sales are prohibited by federal law.  The sales actually take place between the pharmacy and Novartis.  According to the Department of Labor, the exemption in the FLSA requires the employee to actually make sales.  Since no sales are made, the representatives do not meet the qualifications for the “outside sales” exemption.

Regarding the claim that the representatives satisfy the “administrative” exemption, the Department of Labor states that the representatives are not permitted to “exercise discretion and independent judgment with respect to matters of significance,” as required by the exemption.  The representatives are told who to call, given calling goals, and are required to use company scripts, manuals, brochures, and other materials.  If a physician asks a question not covered by the materials, the representative must either dodge the question by referring back to the provided materials or direct the physician to the company’s medical experts.

The import of the Second Circuit’s decision will be significant, as if the Department of Labor’s position is accepted the result should be a reclassification of a large number of pharmaceutical sales representatives across the industry.  It would also mean that the effected employees should promptly seek legal counsel to determine what unpaid overtime they might be entitled to receive.

For information on the Fair Labor Standards Act and The Employment Law Group® law firm’s Overtime Practice, click here.

This week the Supreme Court denied writ of certiorari in Morgan v. Family Dollar Stores, Inc., thereby allowing the 2006 jury verdict in favor of 1,424 store managers for unpaid overtime to stand.  Among the issues raised on appeal was whether store managers were correctly classified as exempt employees under the Fair Labor Standards Act (FLSA).  The plaintiffs, current and former store managers, alleged that Family Dollar failed to pay its store managers overtime in violation of the FLSA.  Family Dollar claimed that as store managers, the employees were exempt from overtime pay.  The Eleventh Circuit affirmed the district court’s finding that the store managers were misclassified as exempt since they spent 80-90% of their time performing non-managerial tasks such as stocking shelves, running cash registers, unloading trucks, and performing janitorial duties.  The store managers were managers in title only and therefore not exempt from overtime wages prescribed under the FLSA.

The Eleventh Circuit also held that the district court was within its discretion in denying Family Dollar’s motions to decertify the plaintiffs’ class action status because the court carefully followed the two-stage process for evaluating a collective action and found that the evidence demonstrated that the 1,424 managers in the class were similarly situated in at least 14 key areas.

That the Supreme Court denied review is important to potential plaintiffs in unpaid overtime class action suits.  It lets stand the important lenient standard for initial certifications of class action status and ensures that employers cannot take advantage of employees by granting them a greater title than their position deserves.  This protects employees from being deprived of the important rights granted to them under the FLSA.

For more information on the FLSA and The Employment Law Group® law firm’s Overtime Practice, click here.