Recent developments in a federal court in Illinois – Strait v. Belcan Engineering Group Inc., No. 11-CV-01306 – have set a precedent with long term implications when a motion for class-action in an ongoing lawsuit was denied against a staffing firm for violating the tenets of the Fair Labor Standards Act with regard to the payment of overtime, at one of its locations. The plaintiff, a temporary employee, had alleged that the unlawful pay practices of the firm must have affected many others and moved for a class action status to the suit to enable other temporary employees to join the lawsuit. The firm was alleged to be ‘rounding off’ the hours resulting in uncompensated ‘off-the-clock’ time for which overtime was not paid though it exceeded the mandated 40 hours.
For many a large organization, it makes good organizational policy to share and implement policies, methods and best practices across its different locations – so as to leverage upon the accumulated knowledge and experience while avoiding wasted effort a.k.a. reinventing the wheel. But then, therein lurks a potential pitfall too. Though companies have come a long way from the racist practices of the rampant civil rights violations to behave better under the supervision of various legal bodies like the EEOC as well as acts like the FLSA; they tend to establish a uniform corporate culture and implement common practices across their various locations – laying themselves open to Class Action suits multiplying their risk thousand-fold.
Walmart is but one example of how large companies could face class action suits when corporate culture and replication of practices result in the same error being repeated at another location, providing the scope for multiple claims against their corporate policies in hiring, promoting or assigning their employees! For an organization with over 3400 stores and more than 2.1 million employees, it is a nightmare best avoided. Many employers are also facing the EEOC’s demands for information on their hiring policies and total workforce practices across nationwide offices – based on just a single charge.
Particulars of the Case:
The Illinois court’s denial was a result of following aspects governing the case:
The staffing firm had clearly established policies that an employee’s schedule is at the discretion of the site general manager and that pay is established and controlled by supervisors at the specific location.
The plaintiff’s failure to prove that temporary employees at other work sites shared similar job requirements and pay provisions – which is a requirement to establish cause for a class action suit. The Illinois court drew upon another ruling in a Texas court Rueda v. Tecon Services Inc., 2011 WL 2566072 which held that FLSA violations at one location do not automatically imply country wide culpability.
Negative Effects of Class Actions:
Let us look at some other reasons which make class action suits unwieldy if not unwarranted:
In view of the strong regulatory controls against discriminatory practices, most managers would consciously avoid such actions and hence a class action would be a colossal, unnecessary and wasteful effort to prove a non-existent cause for action.
Even if more than one manager should behave in a discriminatory manner, the chances of the circumstances being similar are extremely thin and possibly non-existent, again resulting in wasted effort.
Given the mammoth sizes of organizations like Walmart, the amount of preparation and time required as well as the legal expenses make the whole exercise futile and unviable whereas individual cases provide the scope for effective prosecution and quicker settlement.
Organizations would be well-advised to establish procedures which make it impossible for anyone to bring a class action against them by ensuring that responsibilities are localized for managing the wage and hour issues effectively and by instituting audits at irregular intervals to weed out possible discriminatory practices.
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