Go ahead and settle overtime cases, but know what you’re buying when you do — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Go ahead and settle overtime cases, but know what you’re buying when you do

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If an employee thinks he isn’t being properly paid for overtime, expect a lawsuit. You may be able to settle such a case—at a price. It will likely be expensive, covering attorneys’ fees as well as the lost wages. Plus, the court will carefully scrutinize the settlement to make sure it’s fair.

Recent case: Wilver Archilla worked for J&D Welding and claimed he had not been paid for his overtime work. Instead, he had been paid his regular hourly rate. He hired an attorney, who sued under the Fair Labor Standards Act, claiming Archilla was shorted $1,900 for about 200 overtime hours.

The parties agreed to settle the case, and the court approved the settlement. Archilla got $2,000. Archilla’s attorney got $3,500. (Archilla v. J&D Welding, No. 6:08-CV-1089, MD FL, 2008)

Final note: This still wasn’t a bad deal for the employer. Had the case gone to trial, the employee might have received double his lost wages (i.e., $3,800), and the attorney much more. Such cases also run the risk of turning into class-action lawsuits if many employees were paid improperly. When that happens, costs skyrocket.

Your best bet is to make sure you have all employees properly classified as exempt or nonexempt—and pay nonexempt employees for every hour of overtime worked. Your attorney can help to review your overtime program to make sure it’s legal.

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