Joe Nocera wrote an Op-Ed piece for the New York Times recently, criticizing the use of class actions as nothing more than a “business model” for plaintiffs’ lawyers which results in them getting their “vig.” Well, since Mr. Nocera isn’t a lawyer and has never represented a class of victims of corporate greed or malfeasance, I don’t put too much stock in his opinion. I will take this moment, however, to explain how the class actions that I bring on behalf of employees are a good an essential part of our economy.
As the rich and powerful in our country become more rich and more powerful, they exert that power to control and reduce their most variable business cost – labor. Why corporations have such a problem paying a day’s pay for a day’s work I really do not understand, but many businesses out there seem to want to pay employees less and less, even though their productivity continues to go up.
One way corporations keep labor costs down is by classifying their workers as “exempt” from the overtime laws. These laws (the 1938 Fair Labor Standards Act was the first) were designed to protect workers from employers that might work them too long and pay them too little. The regular work week was set at 40 hours. After that, workers get time and a half. This rule discourages employers from working people to death and pays those workers a premium when they put in extra hours.
These laws were not designed to apply to the higher ups in the company, including the “executives” the “professionals” and the “administrators.” Definitions were written to describe who these people were, and everyone else gets overtime.
Little by little, corporations started pushing the envelope and classifying workers as “executives” even when they mostly stock shelves at a grocery store, or classifying workers as “administrators” even though they don’t set company policies and spend most of their time doing production work.
The problem for employees is that they usually don’t understand their rights and so they don’t enforce them. What is worse, employers sell these classifications to them as “promotions”, even though at the end of the day they actually earn less per hour than they used to in the hourly position had they kept their overtime pay.
When one of these workers finds a lawyer who realizes that they have all been illegally denied overtime pay, the class action mechanism provides an important public service. The lawsuit notifies the rest of the class that they may have a claim (when most of them had no idea) and it allows the court system to adjudicate their rights in one lawsuit rather than hundreds or even thousands.
Nocera’s criticism of class actions is truly ignorant and misplaced. Although he was writing about the BP oil spill, his generalized criticism would seemingly apply to class and collective actions of other sorts, such as those to recover unpaid wages or overtime. Mostly, he seems overly concerned that lawyers make money on these cases. It should be noted, however, that lawyers take huge risks bringing class actions and dedicate thousands of hours and hundreds of thousands of dollars to these cases. Yes, when we are successful, we do quite well, but most of us lose our share of cases as well . Any notion that class action legal work is easy, unearned money is simply silly.
Nocera also doesn’t seem to get the point that, even when corporations pay to settle these cases, it is usually for far less money than the harm they’ve caused. In my cases, employers usually have misclassified workers for many years, but in most cases the law only allows us to sue for the most recent three. When that corporation pays 50 cents on the dollar to settle, they have gotten away with a decade or more of free overtime and paid a fraction of what they owe. In one typical case we handled, an employer denied their workers overtime for 12 years, then paid $2,000,000 (50 cents on the dollar) to settle the most recent 3 years. By those figures, they really owed $16,000,000, and got $14,000,000 in free labor! The take away: it is a good “business model” for employers to violate overtime laws.
I suspect that the same is true for the victims of the BP spill. BP probably paid out only a fraction of the real harm that they did to the coast. Nocera should know better than to imply that BP and other law-breaking corporations are victims of greedy lawyers. In the world of wage/hour violations, plaintiffs’ class action lawyers earn our attorneys’ fees. Despite employers’ complaints about the cost of defending these cases, the fact is that they realized the benefit of free labor for years before they were caught and paid only a fraction of their true debt. Now that is a “business model” that Mr. Nocera should criticize!