updated 10/17/2003 6:54:12 PM ET 2003-10-17T22:54:12

Dan Gabel is calling from the road — again. As an Oracle Corp. trainer, Gabel figures he has been traveling on business for at least 11 of the past 12 weeks, routinely putting in 60 to 70 hours a week, and he’s tired of it.

Gabel, 54, makes good money traveling the country teaching customers how to use Oracle’s database software. Including incentive pay, Oracle trainers earn from $60,000 to $100,000 a year, he said. But the long hours and time on the road have taken a toll on his health and personal life, he says, and finally this year Gabel and a colleague initiated a class-action lawsuit seeking unpaid overtime wages from the past several years. Their lawyer says the suit, covering about 500 workers, could be worth $75 million.

“I’m not complaining about my pay so much — that’s not the issue,” Gabel said. “The issue is the time that we’re having to work for that pay.” Gabel calculates that on an hourly basis he is making about the same wage as if he had stuck with an earlier career as a public school teacher.

Gabel’s lawsuit is just one of dozens that have been filed against employers in recent years seeking unpaid overtime wages. In a landmark 2001 case, a jury ordered Farmers Insurance Exchange to pay $90 million after a court found the company had failed to properly compensate 2,400 claims adjusters. The company is appealing the verdict, but Radio Shack, Taco Bell, Starbucks, Pacific Bell and other companies have settled similar cases, paying out tens of millions of dollars in back wages and legal fees.

“The fact is they have hit upon a set of regulations that just because of their age is very difficult to apply in today’s workspace,” said Michael Eastman, director of labor law policy for the U.S. Chamber of Commerce. “There are a lot of gray areas.”

He said the wave of litigation is the business group’s “principal reason” for supporting a Bush administration attempt to rewrite the rules covering which white-collar workers qualify for overtime pay.

“What should be a simple test to determine an employee’s overtime eligibility is in fact very complicated today,” said Eastman. “Even the most well-intentioned employer today often does not know whether he has done it right, and that is the situation we want to correct.”

Here comes the judge
Lawsuits over working conditions — and particularly costly class-action lawsuits — are among the fastest-growing type of civil litigation filed in federal court. Last year 3,900 cases were brought under the FLSA, more than double the 1,900 filed in 2001, according to the Administrative Office of the U.S. Courts.

Assistant Labor Secretary Victoria Lipnic said economic resources are being wasted on litigation because of dated rules that employers have trouble interpreting.

"...that is our responsibility at the Labor Department -- to make sure that there are rules on the book that are much clearer and operate in real time for people who need wages in their paychecks in real time," said Assistant Labor Secretary Victoria Lipnic.
“I don’t fault plaintiff attorneys for taking that up and bringing these cases,” she said. “But that is our responsibility at the Labor Department — to make sure that there are rules on the book that are much clearer and operate in real time for people who need wages in their paychecks in real time.”

Some lawyers and activists contend the Bush administration is trying to protect employers from potential lawsuits by making it easier for them to pay white-collar workers a straight salary, a charge vehemently denied by Labor Department officials.

“They’re making these exemptions so broad you can drive a truck through,” said Jim Finberg, a San Francisco attorney for Wal-Mart workers in a case alleging the retail giant has forced them to work off-the-clock. “It indicates to me that it’s part of George W. Bush’s political agenda, and it shouldn’t be.”

Lipnic said the new rules, which could go into effect early next year, are intended to cause as little economic disruption as possible.

“Every administration, Republican and Democrat, has looked at this since the Carter administration and not done anything about it,” she said. “Now we’re at the point where we have rules on the book that are inapplicable to much of the work force. ... That’s really an unacceptable situation.”

Ross Eisenbrey, policy director of the labor-affiliated Economic Policy Institute, called that argument “completely phony.” The complex rules springing from the 1938 Fair Labor Standards Act have been clarified by 65 years of case law, he said.

“Certainly millions more workers will qualify (as exempt from overtime) under the new rules than under the old rules,” he said. “There isn’t any new clarity at all — it is just lowering the bar.”

The Oracle lawsuit is an interesting departure from the class-action labor litigation of the past few years, which mainly has targeted retail outlets. In a typical case, Radio Shack paid $30 million last year to settle a case brought by store managers in California who claimed they had to work 50, 60 or even 70 hours a week for annual pay of less than $45,000 and no overtime compensation. Under federal and state law managers can exempt rules regarding overtime pay, but the California workers contended that little of their work involved actual management.

“Our argument throughout all of this is that the Radio Shack employees are not really managers at all,” said Ryan Stephan, a Chicago attorney now pressing a national class-action case against the Fort Worth, Texas-based retailer. “They’re really senior sales associates or senior stock people. The vast majority of their time is spent selling, cleaning the stores, pricing, stocking — all non-managerial duties.”

Radio Shack contends its managers have been properly classified as exempt from overtime pay.

Bob Thompson, a California lawyer who represented Radio Shack workers and now is leading the suit against Oracle, said most retailers “have gotten wiser” about paying overtime after seeing the costly settlements, leaving fewer high-profile targets in the industry. He said the Oracle case could be the vanguard of a new wave of lawsuits in the high-tech industry.

“We know a lot of people in the high-tech industry work enormous amounts of hours,” said Thompson.

At the peak of the dot-com boom, many tech workers probably didn’t mind those long hours. They were able to command high salaries and lucrative stock options, assured of multiple job offers if they were to seek new employment.

“Of course all that is getting taken away,” Thompson said. “That makes employees disgruntled. When they get disgruntled they look for why they aren’t making the money. Now they want everything that is due them. If they are savvy, they will find they are not being paid properly. They will look for what ways to get even, and then they come to people like me.”

Oracle declined to comment, but in court filings it has argued that its “Oracle University” trainers are properly classified as exempt from laws requiring overtime pay because they are either administrative or “learned professional” employees.

Nevertheless the company has decided to begin paying the California-based trainers on an hourly basis beginning in September, according to an e-mail provided by trainers as evidence in the case.

“While we are defending the legal action vigorously, as we believe it has no merit, we have made a business decision regarding job classification in order to minimize our future risk,” Oracle vice president Ken Hamel said in the e-mail.

Presumably the decision affects only California-based workers because California employment laws regarding overtime are much more stringent than federal laws. For example, a federal law exempts some computer workers from overtime rules, including system analysts and software developers, if they make at least $27.63 an hour. In California the minimum pay for the computer employee exemption is more than $43 an hour or $89,000 a year.

Overtime for labor lawyers
Whatever happens to the federal rules, California law will continue to offer a rich ground for labor lawyers seeking to hold employers accountable, said Thompson.

“Some of the these employers are huge, so it’s not like they weren’t aware of the law,” Thompson said. “So if they are not complying with it one would have to suspect they are not complying because they have made a cost-benefit analysis that they can make out like bandits.”

He said the complex and somewhat antiquated federal laws probably are due for an overhaul and clearly will simplify the overtime test for employers.

“By the same token most of these companies are nationwide, so they still need to comply with the local and state laws,” he said. “So I don’t know if this is the panacea the Labor Department may think it is.”

Lipnic, of the Labor Department, said she is not surprised the proposed changes have sparked so much controversy, generating 80,000 comment letters and sharply dividing Congress.

“There is a magic word involved here, and that word is overtime,” she said. “That word has a lot of resonance with the workforce, as well it should.” She stressed that the proposed changes apply only to white-collar workers who are paid a straight salary. “This is really not the sea change that I think it is being portrayed as,” she said.

That provides little comfort to Gabel, the Oracle trainer, who describes himself as a conservative Republican who voted for Bush in 2000.

“I believe the Republicans had better change what they’re doing or they’re going to be swept out of office by guys like me,” he said. “There are a lot of us working class Americans who might have been in manufacturing in the past, and now we’re working with our minds.”

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