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Fair Labor Standards Act in Focus as Companies Attempt to Increase Their Bottom Line

Counsel Financial

As companies continue to try to improve their revenues following the economic malaise of the past several years, there appears to be a concomitant increase in litigation involving the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et. seq., which became effective in July 2009. One example of this is Darden Restaurants, Inc., of Orlando, Florida, owner of popular restaurant chains Olive Garden, Red Lobster, Longhorn Steakhouse and The Capital Grille.

In October 2012, Darden announced plans to convert some of its approximate 185,000 workers from full-time to part-time employment. The change in type of employment allegedly was in reaction to President Obama’s Patient Protection and Affordable Care Act, which becomes effective on January 1, 2014 and requires companies with 50 or more full-time employees to offer health insurance or be subject to fines of $2,000 per employee.

In the wake of “Obamacare,” it is projected that more corporations will use the new healthcare law as an excuse to take away employee benefits. Darden, like other large corporations, however, must be cognizant that such measures may trigger compliance issues under the FLSA. The FLSA establishes a minimum wage of $7.25 per hour and requires overtime pay for all hours in excess of a 40-hour workweek. The act applies to employees working in both the private sector and in federal, state or local government jobs. The act also ensures that men and women working at the same job, performing with the same level of skill, experience and responsibility, will be paid equally, inclusive of regular wages, paid leave, tuition assistance and other benefits.

Darden has previously been the focus of potential FLSA violations. On September 6, 2012, Darden was sued by non-management employees in the case Mathis v. Darden Restaurants Inc., in the U.S. District Court, Southern District of Florida. The Mathis case involved allegations by employees that Darden did not pay them minimum wage, that employees could not clock into work until the first customers entered the restaurant and they did not receive proper payment for overtime work performed. The employees contended that they were entitled to back pay because Darden required them to conduct general maintenance and prep duties after they clocked-out for which they were not paid. Additionally, some of the employees earned a tip credit wage of approximately $2.13 per hour, rather than the FLSA mandated minimum wage of $7.25 per hour, even though they performed work where they would not receive any tips.

Darden was also accused of firing two workers in retaliation for their joining the lawsuit. An injunction to restore their jobs was denied on March 4, 2013; the judge explained that the injunction did not meet strict legal criteria and as such, the decision was better left to a jury. It was also reported that Darden officials questioned some of the 54 employees involved in the lawsuit. They have since been informed not to do so without notifying Plaintiffs’ counsel. The case is currently in discovery.

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