Business Litigation Report: June 2012

06/28/2012 / Business Litigation Practice Group



In the June Issue:

Employee Overtime for Cell Phone Use – Employers May Incur Unintended Wage Obligations


Employers can unwittingly accrue liability for unpaid wages including overtime as a result of employees performing work on cell phones, particularly smart phones or PDAs, after hours or even during lunch breaks.  The employee who is using a smart phone to send emails to colleagues or customers is probably working under the Fair Labor Standards Act (“FLSA”), meaning that the time devoted to those tasks is compensable time, which is time for which the employer has to pay.  In the event that those minutes and hours push the employee over 40 hours per week, they will also trigger overtime liability.  Although not an issue with exempt, salaried personnel under the FLSA, this can be a significant risk for hourly workers. 


Minnesota Employers Cannot Agree To Refrain From Contesting A Claim For Unemployment Benefits
By Daniel J. Ballintine

The law in Minnesota has long-provided that employers cannot ask employees to waive their rights to unemployment benefits and that any agreement to that effect is void. In the past, however, some employers have offered to refrain from contestin g a claim for unemployment benefits as consideration for an employee’s release of claims in a separation agreement, for example. Although this practice has not been explicitly prohibited under the law, there has been risk associated with it since employers cannot commit fraud in dealings with the Minnesota Department of Employment and Economic Development (“DEED”), which administers the state’s unemployment benefits program. For example, an employer cannot lie to DEED and report that an employee was fired when, in fact, he or she voluntarily resigned. To address this issue, employers have often clarified their agreements with employees to provide that while they will not contest a claim for unemployment benefits, they can and will provide truthful information in response to any questions from DEED. This practice may now be purely a thing of the past. To read more, click here.

Pharmaceutical Sales Representatives Exempt from Overtime
By James A. Godwin


One of the most common wage and hour questions companies have is whether their employees are exempt from overtime requirements under the Fair Labor Standards Act, 29 U.S.C. 201, et seq. (the “FLSA”).  The FLSA generally requires the payment of a minimum wage and overtime pay to employees for each hour worked over 40 hours in a week. The FLSA and the Department of Labor’s (“DOL”) implementing regulations, however, contain numerous exemptions for workers ranging from highly paid employees to forestry workers.  Employers often assume that the exemptions are broader than they are.  However, the exemptions are specific and narrow.  Many times employers will look at the name of an exemption and determine that a certain class of workers falls under the exemption without further analysis.  For examp le, some companies have assumed that the “outside salesman” exemption applies to any salesperson.  In reality, each of the exemptions has several specific requirements which must be met. 


Municipal Bankruptcies May Force Municipal Bondholders to Accept Haircuts
By Jay Reding


Most people are familiar with the two most common forms of bankruptcy protection under the Bankruptcy Code – Chapter 7 liquidations and Chapter 11 reorganizations.  But like individuals and companies, municipalities can also file for bankruptcy protection under Chapter 9 of the Bankruptcy Code.  Now the city of Stockton, California has become the largest city to file for municipal bankruptcy protection following major municipal bankruptcy filings in Jackson County, Alabama and Harrisburg, Pennsylvania.  These municipal bankruptcies remain rare, but their numbers are increasing as municipal revenues decline and obligations such as pensions increase.  Not only do municipal bankruptcies give us a window into the state of the public sector, but they may impact municipal bondholders as well. 


Business Litigation Department Attorneys:






Richard J. "Jay" Reding


John A. Kvinge


Cynthia M. Klaus




L. Kathleen Harrell-Latham


Susan E. Tegt







James A. Godwin









Lauris A. Heyerdahl


Glenna L. Gilbert

This alert is provided as a service to our clients and firm associates. While the information provided in this publication is believed to be accurate, it is general in nature and should not be construed as legal advice.