A Waffle House franchisee recently was hit with a $2.9 million verdict in a class action suit filed under the Fair Labor Standards Act. The court held that the franchisee failed to pay overtime to shift managers it erroneously had classified as "exempt." The managers routinely performed work such as waiting on tables and operating the grills at the restaurants.
If $2.9 million sounds like a lot of money for a mere FLSA violation, consider that it resulted from what has become a recent trend: the increased use of class actions in the FLSA context.
Across the country in recent years, the plaintiff's bar has come to view the FLSA class action as one of its most potent weapons, and for good reason.
Unlike Title VII class action cases, in which the putative classes often are not certified for lack of "commonality," putative class members in an FLSA case need only be "similarly situated." This standard, set forth in the FLSA itself (rather than Federal Rule 23, which applies to other class
actions), is relatively easier to meet because the same company policy or practice that results in one employee being underpaid or improperly classified may have ramifications for hundreds or even thousands of other employees. For this reason, employers have a strong economic incentive to properly classify their employees and to ensure that employees are paid in accordance with the FLSA. In addition, employers should be aware that liquidated damages equal to the amount of backpay are routinely awarded in FLSA cases.
The best way to ensure compliance with the FLSA is to consider whether employees classified as "exempt" truly meet that standard. Employers sometimes mistakenly believe that a salaried employee is per se "exempt" under the FLSA. In reality, the FLSA requires that, to be "exempt," employees be "employed in a bona fide executive, administrative or professional capacity." Not every salaried employee meets this test. More than ever, employers have an incentive to make sure they comply with the FLSA. A Waffle House franchisee found out the hard way what can happen if you don't. Cowan v. Treetop Enterprises, Inc., No. 3:98-0623 (M.D. Tenn. Aug. 16, 2001).
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