In some instances, it’s hard to see what benefit there is to a class action other than for the lawyers. This is particularly true in so-called “regular rate” cases challenging employer perks such as free meals, various kinds of bonuses, or other employee benefits. We’ve commented on these cases previously.
A recent case raises these same questions. In Alminiana v. Lowe’s Home Centers, LLC, Case No. 5:20-cv-00010 (W.D. N.C., Sept. 22, 2020), the complaint challenged the consequences of two benefits provided by an employer to its employees. The first was a one-time payment made by the company to its employees in 2018 to make up for 2017 changes in the tax code that year that had adversely affected them. The second was a program to promote charitable activities by paying employees for up to eight hours per year for doing volunteer work for charities. It’s pretty hard to argue with either of these.
Or maybe not. The plaintiffs filed a 41-page complaint against the employer, asserting multiple class and collective action claims purportedly on behalf of 260,000 hourly exempt employees. The complaint argued that these amounts should have been treated as “nondiscretionary bonuses” or as time worked and included in the calculation of overtime.
The amounts at stake for the putative class members were relatively small. The tax amounts paid in 2018, for example, were on the order of $200 for some of the class representatives. Spread across 2,000 hours, that amounts to 10 cents per hour. If the employee worked 100 hours of overtime, their claim would be worth … drum roll, please … about $15.
The defendant moved to dismiss the complaint and, following a report and recommendation from the magistrate judge, the district court granted dismissal. It found that the tax compensation payment was, indeed, discretionary and need not have been included in the regular rate. It similarly found that time an employee volunteered for a charity, even if the employer paid the regular rate for that time, similarly need not be considered in computing overtime.
The district court certainly reached the right decision, but given the good reasons for the employer’s payments – to help out rank-and-file employees and to encourage good citizenship – and the case’s minimal potential benefit to them, one might very well question why the case was brought in the first place. Indeed, such cases incentivize employers not to provide such benefits and have questionable benefit, particularly for current employees.
The bottom line: Employers considering employee incentives must also weigh the risk of regular rate lawsuits no matter how good their motives may be.