Pepsi sued for paying Chinese Overtime to its workers.



Pepsi Beverages Company has recently joined a long list of employers who are being sued for paying what some employee’s refer to as “Chinese Overtime.” Yes, it’s not the best name for it. The proper name is Fluctuating Work Week overtime. Some refer to it as “half time” overtime. Whatever you call it, employee’s don’t like it and there are lawsuits all over the country challenging its use.

Usually, employers pay an hourly wage to their non-exempt workers and then pay one and one half that wage when they work overtime. For example, if someone makes $20 per hour, they get $30 per hour for overtime.

Well, in an ongoing effort by employers to save every nickel they can, they are now paying overtime pursuant to a rare and, many say unfair method.

They pay a salary to their employees, then, when they work say 50 hours, they divide that salary by 50 (not 40) to determine the hourly rate. They then pay ½ that rate for the overtime. For someone earning $800 per week, this means getting $80 for ten hours of overtime instead of $300.

Unfortunately, the U.S. Department of Labor allows this payment scheme but only in certain circumstances. Employees and their lawyers around the country are attacking this rule whenever they find a way.

The latest employer to use this method is Pepsi. Stephen Boyd has filed a lawsuit in the federal court in Massachusetts claiming that Pepsi is not following all the rules and therefore should not be allowed to pay ½ overtime. His lawsuit explains it all.

While the claims arise out of a collective bargaining agreement of a local union, it could be that Pepsi pays all of its BCRs this way. If so, BCRs from around the country might be able to join.

McJobs Are Not The Answer!


First, the good news. The Bureau of Labor Statistics is reporting the creation of 288,000 new jobs in April. This is about 63,000 more jobs than people were anticipating. As a result, the unemployment rate fell to 6.3%, the lowest rate since September, 2008.

Now, the bad news. Most of these new jobs are low-wage “McJobs.” According to the National Employment Law Project, there are nearly two million fewer jobs in mid- and higher-wage industries than there were before the recession took hold, while there are 1.85 million more jobs in lower-wage industries. This means that more Americans are working for pittance wages, in jobs where they are more likely to suffer from wage theft. Even worse, the difference between what CEOs make and what the average worker makes has skyrocketed. For example, the CEO of McDonald’s makes over $9,200 an hour, while the company advises its workers to apply for food stamps to help make ends meet.

This is why we need to raise the minimum wage (which Senate Republicans have blocked) and strictly enforce the laws against wage theft. That includes suing companies that steal wages from their workers.

***Blog Post written by Attorney Anthony Pantuso***


Are auto damage appraisers entitled to overtime pay?

As an attorney, I fully understand the frustration that comes when we just can’t give a straight answer to a simple question.  The problem is that different judges can rule differently on the same issue.  When that happens (we call that a “split of authority”) things get confusing.

The law regarding auto damage appraisers is a good example.  Some courts have ruled that they get overtime pay and some have ruled that they don’t.

Any historical analysis starts with the U.S. Department of Labor.  Here is what they have said since 1975:

Auto damage appraisers:  Appraisers whose functions are to inspect damaged motor vehicles in order to estimate the cost of the necessary repairs, and who also reach an “agreed” price with the repair shop on the cost of repairs, do not customarily and regularly exercise discretion and independent judgment as required by Reg. 541.2.  Their work consists essentially of the determination of facts, and in making their estimates they are guided primarily by their skill and experience and by written manuals of established labor and material costs.  However, there may be sufficient elements in the job to permit the application of the upset salary rule.

Field Operations Handbook,  Section 22d01.  A federal judge in Connecticut ruled in favor of auto damage appraisers in 1994.  Reich v. AIAC, 902 F.Supp. at 326 (granting judgment for automobile damage appraisers).  Another Connecticut judge ruled in favor of auto damage appraisers in 2007 (Neary v. Metropolitan Prop. & Cas. Ins. Co., 517 F.Supp.2d 606 (D.Conn. 2007).  The Ninth Circuit Court of Appeals wrote this:

Appraisers who merely inspect damaged vehicles to estimate the cost of labor and materials and to reach an agreed price for repairs with the repair shop have not been considered as the type of employees who customarily and regularly exercise discretion and independent judgment. . . .  In making their estimates, they are guided primarily by their skill and experience and by written manuals of established labor and material costs. . . . DOL Wage & Hour Div. Op. Ltr., at 1-2 (Feb. 18, 1963). 

In contrast, an adjuster “investigates the validity and the extent of liability of a claim and negotiates settlement . . . irrespective of whether the claim is one for property damage or for personal injury.”  Id. at 2.  And in 1957, the DOL opined that if adjusters are given “reasonable latitude in carrying on negotiations with the insured, the results of which form the basis of their recommendations, they may be [exempt].”  DOL Wage & Hour Div. Op. Ltr., at 2 (Oct. 24, 1957).  If those adjusters had authority to make settlements, that would be “stronger evidence of their exercise of discretion and independent judgment.”  Id.In re Farmers Ins. Exch., 466 F.3d 853, 861 (9th Cir. 2006).

                Occasionally, courts have ruled that auto damage appraisers are more like adjusters and are exempt.  The Seventh Circuit Court of Appeals ruled in 2008 that Material Damage Appraisers at CC Services were not entitled to overtime wages.  Roe-Midgett v. CC Services, Inc., 512 F.3d 865 (2008).  These workers had settlement authority up to $12,000.  The D.C. Court of Appeals ruled that “auto damage adjusters” at GEICO are not entitled to overtime pay.  Robinson-Smith v. GEICO, .. F.3d. .. (2010).

                The key difference seems to be the extent to which the employee handles total loss claims and negotiates with insureds.  The more total loss and the more negotiation, the more likely courts are to rule that they are exempt adjusters.  On the other hand, the more the employees work is limited to appraising damaged vehicles and following company guidelines, the more likely he is to be non-exempt.


BJ’s sued a third time for same wage violation!

Are overtime class actions deterring employers?  Evidently not!

In 2008, BJ’s Wholesale Club was sued for not paying overtime wages to its “mid-managers.”  That lawsuit alleged that “mid-managers” worked over 40 hours per week without any extra pay and that they did not qualify for the “executive” exemption because their primary duty was not management.  Employees who spend most of their time and efforts performing hourly tasks and only occasionally act as managers cannot be considered “executives” under the law.

This first lawsuit settled for over $9 million dollars within one year.  Despite this multi-million dollar payout, BJ’s continued to deny its mid-managers overtime pay.  They maintained their “exempt” classification and benefited from the many long hours these employees worked without overtime premiums.

In 2012, BJ’s was hit with another overtime lawsuit for a smaller group of mid-managers.  That case settled for $2.7 million, and, again, you guessed it – BJ’s continued to maintain the “exempt” classification of its mid-managers.

This time, however, BJ’s took internal steps to prevent another class action lawsuit.  In April 2013, it rolled out a new employee handbook which contained language designed to keep employees away from the courts and to prevent class actions.  It called its program the Open Door Solutions plan,  BJ’s President Laura Sen introduced this plan as a way to “keep the lines of communication open” with her “Team Members.”  She also claimed that the plan allowed BJ’s employees to “achieve a thoughtful resolution of any issues.”  In fact, this plan’s central purpose was to avoid future costly class action litigation and to enable BJ’s to continue its exempt classification of its mid-managers.  The documentation included a “Class Action Waiver”, which was designed to prevent class actions by BJ’s employees.

Well, it didn’t work.  Recently, a third class action was filed against BJ’s by mid-managers.  This lawsuit is on file in the District of Connecticut.  It claims, like the lawsuits before it, that mid-managers spend most of their time doing hourly work (i.e., not managing) and that they should be compensated for their overtime hours.  One interesting note, the class action waiver prohibits class arbitrations, but not class actions in court:

“Notwithstanding this section, BJ’s agrees that I am not waiving my right under Section 7 of the National Labor Relations Act to file or participate in a class or collective action in court,…” 

This language leaves the door wide open to a class or collective action in court.

Final thoughts?  Wouldn’t it be easier and fairer to simply pay these hard working employees their fair wages? Is it so important to BJ’s  bottom line to classify these employees as “executives?”  Wouldn’t it be better to pay them rather than BJ’s lawyers?  Like I said, as expensive as these class actions are to defend and settle, companies still find it profitable to classify workers as exempt wherever they can.  The amount they save in labor costs is usually far greater than what they pay in settlements and attorneys’ fees.  Too bad for hard working mid-managers.  They deserve to be paid for the hours they work – all of them!

Grocery store worker